Determinants of Bank Long-term Lending Behavior in the Central African Economic and Monetary Community (CEMAC)

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1 Review of Economics & Finance Submied on 05/Jan./2012 Aricle ID: Consan, Fouopi Djiogap and Augusin Ngomsi Deerminans of Bank Long-erm Lending Behavior in he Cenral African Economic and Moneary Communiy (CEMAC) Consan, Fouopi Djiogap (Correspondence auhor) Faculy of Economics and Managemen Universiy of Yaounde II CAMEROON Tel: , Augusin Ngomsi Faculy of Economics and Managemen Universiy of Yaounde II CAMEROON Tel: , Absrac: This paper sudies he deerminans of bank long-erm loan in he Cenral African Economic and Moneary Communiy (CEMAC) conex. The sudy aimed o es he common banklevel and macroeconomics deerminans of bank long-erm loan behavior. The model used is esimaed using a sample of six counries from he CEMAC. We find ha a bank s abiliy o exend long-erm business loans depends on is size, capializaion, GDP growh and he availabiliy of long erm liabiliies. These resuls underline he imporance of supply side consrains in exending vial long-erm credi o firms. JEL Classificaions: G21, G32, O16 Keywords: Long-erm business loans, CEMAC, Bank level deerminans, GDP growh 1. Inroducion Bank loans are one of he mos imporan long-erm financing sources in many counries (Freixas and Roche, 2008). In some developed counries like Japan, long erm bank loans represen more han 70% of is oal long-erm deb. The recen cross-counry evidence shows ha banks in he emerging and developing counries economies are relucan o exend long-erm credi o privae businesses. Some facors influencing his relucance are he unsable local governmen economic policies, he idiosyncraic counry legal risk and he riskiness and opaciy of business borrowers in hese counries. Alhough here is a broad body of lieraure ha addresses hese issues, i eiher focuses on he demand side of deb (firms access o credi) or on he cross-counry variaion of bank lending behavior. Lile effor has been devoed in explaining he wihin counry variaion of he supply side (banks) choices in heir long-erm lending pracices, especially in emerging economies. In his paper, we sudy he deerminans of bank long erm lending behavior o firms in developing marke. We focus on long-erm business loans since his ype of exernal financing is crucial for privae firm s invesmen and long-erm growh. Our paper complemens he exising lieraure on credi availabiliy in developing markes in a leas hree imporan ways. Firs, we show ha here is subsanial wihin counry, cross-secional variaion in banks business lending behavior. Second, we provide evidence ha his variaion is sysemaically explained by bank-level characerisics, such as size, capializaion, and access o long-erm funds. From he pracical view, hese resuls shed ligh on bank-level consrains in lending by idenifying he facors ha sysemaically affec banks willingness and abiliy o exend long-erm credi o firms. Third, his ~ 107 ~

2 ISSNs: ; Academic Research Cenre of Canada sudy is he firs empirical aemp o an invesigaion of Cenral Africa counries banks long-erm lending behavior. The quesion his paper deals wih is: wha are he key bank-level and marke deerminans of long-erm lending behavior? We address his quesion empirically by using a sample of commercial bank of CEMAC counries. The Cenral African Economic and Moneary Communiy banking secor is shallow, is sources of funding are poorly diversified, and lending opporuniies are limied. Banks oal asses amoun o only 16 percen of GDP, and lending o he privae secor o 7 percen (15 percen for sub- Saharan Africa). The minimum deposi rae, a 3.25 percen, is well above marke condiions, and his represens an obsacle o financial inermediaion, paricularly in a conex of excess liquidiy. In effec, volailiy of deposis has increased in some counries, and highly concenraed deposis consising mosly of demand or shor-erm deposis limi he supply of long-erm financing. Wih he excepion of Gabon, where 10% of deposis mus be placed in governmen securiies, banks have few opporuniies o inves in securiies, and hey serve a small number of corporae cliens. In ha conex, he maximum lending rae (15 percen) consrains he opimal pricing of risk, limis clien diversificaion o SMEs and households, and leads he banks o boos profiabiliy by increasing fees, a pracice ha limis financial inermediaion. In a general banking lieraure, a long-erm loan is commonly defined as a loan wih an original mauriy of several years. According o inernaional sandards, mos business loans in his caegory have hree o en years mauriy. In his sudy, we define long-erm business loans as loans wih a leas hree years o mauriy, which is he longes mauriy specified by he Cenral African Banking Commission (COBAC) sandards for banks. On average, he sample bank allocaes only abou 1.2% of is asses o long-erm business loans (COBAC, 2008). A he same ime, he long-erm lending aciviy of small and medium size privae domesic banks is negligible. We provide evidence ha hese financial inermediaries focus exclusively on providing shor-erm financing o firms raher han long-erm. The res of he paper is organized as follows: In he secion 2, we presen he review of he relaed lieraure. In secion 3, we describe our mehodology. In secion 4, we presen our mains resuls. In secion 5, we provide a summary and make our concluding remarks. 2. Lieraure Review The brief skech of he heoreical foundaions of relaionship lending highlighs he key elemen of he concep, he informaional privilege of he bank and he resuling bargaining power vis-à-vis he borrower. This elemen in urn provides he raionale for several indicaor variables frequenly used in empirical work o idenify relaionship lending. The mos commonly used proxy for relaionship lending in applied empirical work is he duraion of a bank-borrower relaionship (see e.g. Peersen and Rajan (1994), Berger and Udell (1995), and Ongena and Smih (2001)). The basic idea is ha duraion reflecs he degree of relaionship inensiy over ime. If duraion is equivalen o privae informaion accumulaion over ime, he lock-in of a borrower should increase wih duraion. Duraion hen reflecs swiching coss, he severiy of he hold-up problem, and relaionship inensiy in general. However, he relaion beween accumulaed informaion, duraion, and borrower lock-in does no have o be monoonic. Firs, i may ake ime o esablish a valuable informaion advanage. Second, he value of previously accumulaed privae informaion may sar o decrease afer some ime, for example if he borrower esablishes an observable rack record, as suggesed by Diamond (1991). Third, he marginal value of addiional informaion migh be decreasing. ~ 108 ~

3 Review of Economics & Finance Using he number of bank relaionships as an indicaor for he presence of relaionship lending is based on he premise ha mainaining an exclusive bank relaionship promoes he developmen of close ies beween bank and borrower. Exclusiviy induces a lower degree of direc compeiion beween banks, allows for unique access o valuable informaion, and eases he realizaion of he economic benefis associaed wih relaionship lending, like for insance (efficien) renegoiaion of loan conracs. However, exclusiviy of a bank relaionship is neiher a necessary nor a sufficien condiion for relaionship lending. Firs, Holmsröm and Tirole (1997) have shown ha only a fracion of funds needs o be financed by a monioring lender o deer he borrower from moral hazard. The remaining funds can be raised from he marke or uninformed arm s-lengh banks. Second, he building block of heory is access o valuable privae informaion and is accumulaion over ime. Bu, since valuable informaion is likely o be disribued by he borrower in a sraegic way, his can be accomplished even in he conex of muliple bank relaionships (hough possibly harder), and, mos imporanly, i does no have o happen a all. Hence, he proxy value of he number of simulaneous bank relaionships remains unclear, bu a negaive correlaion beween he number of banks and he incidence of relaionship lending seems plausible. Similar argumens apply when i comes o he share of he borrower s oal deb financing accouned for by relaionship lending since his is concepually he same as he issue of muliple banks, bu wihou he assumpion of equal financing provided by all banks. Therefore, i also seems plausible ha a higher deb financing share increases he likelihood of relaionship lending. The scarciy of long-erm credi availabiliy in developing marke economies is recognized as an obsacle o heir growh. Caprio and Demirguc-Kun (1997) find ha non-financial firms in such markes consider he scarciy of long-erm credi as one of he mos imporan impedimens o heir operaions. They show ha firms ha grew faser han prediced, exhibied higher levels of longerm deb o oal asses. The long-erm credi availabiliy is also sensiive o he developmen level of a counry s financial and legal insiuions. If he legal environmen and he enforcemen of deb conracs are weak hen, as sipulaed by Diamond (1991), banks will miigae poenial credi risks by exending shor-erm raher han long-erm loans. A number of empirical sudies suppor he argumen ha banks use shorer loan mauriies o enforce monioring hrough more frequen renegoiaions of loans and o miigae informaional asymmeries beween he credior and opaque or risky borrowers. Srahan (1999) finds ha safer, larger, and more profiable companies receive loans wih greaer mauriy imes. Oriz-Molena and Penas (2008) repor a negaive and monoonic relaionship beween borrower risk and mauriy and show ha more opaque and risky companies receive shorer mauriy loans. More recen research explores he credi availabiliy and cross-counry variaion in he mauriies of bank loans in he emerging markes. I reveals an imporan risk facor ha affecs he supply of credi in general and loan mauriies in paricular - he legal risk of deb. The legal risk of deb, as defined by Esy and Megginson (2003), depends on boh he srengh of credior s righs and he enforcemen of hose righs in he counry where he loan is originaed. The auhors find ha he srengh of credior s righs affecs non-financial firms deb srucure. Demirgüc-Kun and Maksimovic (1999) find ha in developing counies loan mauriies end o be shorer. The imporance of crediors righs proecion in bank lending decisions, including he credi raioning and he mauriy of loans, is furher suppored by Demirgüc-Kun and Diamond (2004), Qian and Srahan (2007), and Bae and Goyal (2009). González and González (2008) find ha higher bank concenraion acs as a subsiue for credior s proecion. Giannei (2003) finds ha he exisence of credior proecion righs is very imporan in deermining he availabiliy of long erm deb for companies operaing in indusries exhibiing high volailiy of reurns. De Jong, Kabir, ~ 109 ~

4 ISSNs: ; Academic Research Cenre of Canada and Nguyen, (2008) also find ha he exisence of credior s righs proecion in a counry is an imporan facor in deermining he capial srucure of firms operaing in ha counry and ha insiuions favoring credior s righs proecion and enforcemen have more long erm loans available. According o Claessens, Djankov and Nenova (2001), sronger credior and shareholder righs have a srong negaive impac on a company s leverage. Similarly, Fan, Timan and Twie (2006) show ha, in counries wih srong legal sysems and credior proecion righs, firms end o exhibi lower leverage bu higher long erm deb o oal deb raios. Diamond (2004) saes ha in emerging markes where he financial benefis from pursuing legal enforcemen are oo small, crediors migh engage in wha is called lender passiviy. Insead of relying on weakly enforced legal proecion of credior righs or on higher ineres raes, a passive lender will employ non-price mechanisms, such as he mauriy of loans, o effecively conrol credi risk in such environmens. Overall, he prior heoreical and empirical lieraure reveals he imporance of long-erm loans o developing markes firms on one hand and he shorage of hese loans on he oher. I also predics ha bank loan mauriies should be shorer in counries wih higher legal risk and more risky or opaque corporae borrowers. A he same ime, mos prior sudies of long-erm bank financing in he developing markes has focused eiher on cross-counry evidence or he analysis of bank loan mauriies exclusively from he borrower s perspecive. Very lile is known abou banklevel deerminans ha affec long-erm lending o firms. In his paper, we aemp o exend he lieraure on credi availabiliy in a developing marke by focusing on bank-level deerminans of long-erm lending o firms in developing counries. The wihin-counry seing allows us o conrol for he legal and business environmen and o idenify which facors, besides counries and borrower characerisics, are sysemaically relaed o he bank s willingness and abiliy o exend long-erm credi o firms in a risky developing marke. 3. Mehodology and Daa To examine he relaionship beween bank characerisics and bank propensiy o issue longerm loans o firms, a large sample of Cenral Africa Counries banks and a broad se of explanaory variables are applied o a panel daa model. The oal number of observaions is 60, and 9 independen variables are included. To miigae he effecs of exreme ouliers, all consruced financial raios are Winsorized a he one percen level in boh ails of he disribuion. Our major dependen variable is he raio of bank long-erm business loans o oal asses. Our supplemenary dependen variable is he bank overall business lending aciviy, measured as he raio of bank business loans o oal asses. Business loans in his sudy are defined as loans o privae non-financial firms. Long-erm business loans are loans wih over hree years o mauriy. To consruc raios, we scale boh loans caegories by oal bank asses. To explain he bank-level cross-secional variabiliy in long-erm business loans raio, we selec our explanaory variables by relying upon he general exising lieraure on bank lending behavior. More specifically, we accoun for bank size, capializaion, liabiliies srucure, risk aking, ownership ype, inflaion and Gross Domesic Produc (GDP) growh. Bank size is measured as he logarihm of bank asses. Larger banks are more diversified, have larger pools of funds available, have access o larger and more crediworhy corporae borrowers, and have more resources for he developmen of advanced credi risk managemen and evaluaion sysems. Therefore, we expec a posiive relaion beween bank size and he raio of long-erm loans. Bank capializaion is measured by he book equiy o asses raio. Bank capializaion can affec bank willingness and abiliy o exend long-erm loans in several differen ways. ~ 110 ~

5 Review of Economics & Finance Banks wih larger capial cushion agains credi risks should have higher capaciy o exend risky, long-erm loans. In addiion, beer capialized banks can arac more crediworhy borrowers ha will qualify for longer erm loans. Alernaively, high levels of capial can reveal risk averse and conservaively managed banks ha may be relucan o issue risky long-erm loans. Therefore, we canno predic a sign on he capial raio. To capure he poenial mismach beween liabiliies and loans mauriies ha can also affec he bank abiliy o lend long-erm, we accoun for he bank reliance on long-erm financing, measured as he raio of liabiliies wih over hree years o mauriy o oal liabiliies. We expec ha banks wih beer access o long-erm financing should be beer able o issue long-erm loans. We use he Nonperforming loans (NPL), as a measure of he qualiy of bank business loans porfolio. NPL is a sum of borrowed money upon which he debor has no made his or her scheduled paymens for a leas 90 days. A nonperforming loan is eiher in defaul or close o being in defaul. Once a loan is nonperforming, he odds ha i will be repaid in full are considered o be subsanially lower. If he debor sars making paymens again on a nonperforming loan, i becomes a re-performing loan, even if he debor has no caugh up on all he missed paymens. In general, he riskier he banking lending pracices are, he higher heir NPL raio should be. Bank ownership ype is capured by wo dummy variables ha indicae sae-conrolled or foreign-conrolled banks. Sae-conrolled banks can allocae long-erm credi o promoe economic growh and o address he shorage of long-erm financing found in he CEMAC banking secor. If his is he case and regional banks indeed fulfill he social welfare agenda, here should be a posiive and significan relaion beween he regional-conrolled dummy and he raio of long-erm loans. Foreign-conrolled banks may also play a disinc role in allocaing long-erm loans in a developing marke. In paricular, hey may have comparaive advanages in issuing long-erm loans due o beer risk managemen and/or heir abiliy o cherry pick low risk borrowers (Bhaumik and Piesse, 2008). In he inherenly risky developing markes, foreign banks also end o esablish relaions wih more ransparen corporae borrowers. The GDP growh is used o conrol for changes in loan demand, lending sandards are used o conrol for credi supply changes ha arise from changes in banks' lending behavior, and he Cenral Bank rae conrols for moneary policy changes. Inflaion rae is measured by he GDP deflaor. Specifically, he long-erm loans ha we esimae ake he form: LTBL Size i 6 1 Foreign Cap 2 7 Infl LTliab 3 8 ~ 111 ~ GDP NPL 4 v u Sae Here, oal business loan (TBL) is he raio of bank loans o nonfinancial privae firms divided by asses, expressed as a percenage. Long-erm business loans (LTBL) is he raio of bank loans o nonfinancial privae firms wih over hree years mauriy divided by asses, expressed as a percenage. Size is he log of he Bank asses in CFA Billions. Capial (Cap) is he raio of book equiy o asses, expressed as a percenage. Long-erm liabiliy (LTliab) is he raio of bank liabiliies wih over hree years mauriy divided by oal liabiliies, expressed as a percenage. NPL is a sum of borrowed money upon which he debor has no made his or her scheduled paymens for a leas 90 days. Sae = 1 if a bank is majoriy-conrolled by any combinaion of governmen auhoriies or sae-owned companies/enerprises and zero oherwise. Foreign = 1 if a bank is majoriy-conrolled by a foreign invesor zero oherwise. GDP is he growh rae and Infl he inflaion rae. i, v + u are respecively, he specific effec in every counry, a dumb variable of ime and a erm of error. We use he daa from 35 commercial banks of six African counries of he CEMAC over he period These daa are pulled by he COBAC repor and World Developmen Indicaors of he World Bank. The mehod of esimaion is he panel daa model. 5 (1)

6 ISSNs: ; Academic Research Cenre of Canada 4. Regression Resuls and Discussion As described in Secion 3, we disinguish beween he oal business lending aciviy of banks (all mauriies) and long-erm business lending by employing wo alernaives dependen Variables: (1) he raio of business loans o asses and (2) he raio of long-erm business loans o asses. The explanaory variables are idenical in boh models and accoun for bank size, capializaion, reliance on long-erm liabiliies, NPL, ownership ype, Inflaion and GDP Growh. The esimaion resuls are presened in Table 1. Table 1 repors he fixed-effec regression esimaes of equaion (1) for he deerminans of long-erm bank loans. Table 1 Regression resuls Size Cap LT liab NPL Sae Foreign Infl GDP Consan N Adj.-R 2 P-value Dependen variable: Toal business loans as % of asses Dependen variable: Long-erm business loans as % of asses 3.25 (5.12) *** 0,654 (5.94) *** 0.32 (5.37) *** (2.58) ** (2.62) ** (8.11) *** (1.22) (2.51) ** (-2.11) * (0.81) (-1.22) (2.86) ** (0.27) (1.76) (5.29) *** (5.32) *** (-1.82) (-5.21) Noe: Robus -saisics are given in parenhesis; *, **, and *** denoe significance levels of 10%, 5%, and 1%, respecively. In he firs model, he coefficiens on bank size, GDP growh and capial-o asses raio are posiive and saisically significan a he 1 percen level for all hree regressions. This finding indicaes ha larger (and likely more diversified) banks and well capialized banks are beer able o wihsand poenial credi risks and, herefore, allocae higher percenage of heir asses o business loans. The regression resuls for he firs model also sugges wo marginally significan (a a 10% level) associaions: banks wih more long-erm liabiliies are marginally more willing o lend o businesses, while sae-conrolled banks are marginally less likely o lend o businesses. Alhough he esimaed coefficien for inflaion variable is saisically insignifican in explaining he oal business loans raios of banks. The main resuls of our sudy are presened in he second regression where he dependen variable is he raio of long-erm business loans o oal asses. Similar o our prior findings, bank size, GDP growh and capializaion coninue o play an imporan role in deermining he bank s willingness and abiliy o lend o businesses long erm. The coefficiens on hese explanaory variables remain posiive and highly saisically significan, indicaing ha larger banks and beer ~ 112 ~

7 Review of Economics & Finance capialized banks end o exend more long-erm credi o firms han smaller and less capialized banks. As expeced, long-erm liabiliies become even more significan in deermining he bank s propensiy o lend long-erm o businesses han o simply lend o businesses. Ineresingly, he mulivariae resuls in Table 1 reveal ha once we conrol for bank level financial characerisics, he bank ownership effec in long-erm lending, eiher becomes weak (in he case of foreign banks) or compleely disappears (in he case of sae banks). The esimaed coefficien of foreign banks, however, is posiive and highly significan clearly indicaing ha foreign banks end o exhibi higher long erm loan raios. Alhough sae-conrolled and foreignconrolled banks appear o have higher han average involvemen in long-erm lending in Cenral Africa counries, heir involvemen is explained by heir larger size and /or beer access o longerm sable funding in he form of long-erm liabiliies and capial. Since sae banks accoun for almos wo hirds of long-erm business loans, i can be argued ha a few larges sae-conrolled banks, accoun for he bulk of hese loans. In he case of foreignconrolled banks, he coefficien on foreign bank dummy is posiive. One possible explanaion is ha foreign banks are able o cherry pick more ransparen and crediworhy borrowers and, herefore, may be relaively more willing o exend longer erm loans. Banks wih larger Nonperforming Loans also exhibi higher raios of long-erm loans o asses. One plausible explanaion for his resul is ha he NPL raio is endogenous: banks wih higher raio of long-erm loans have overall riskier loan porfolios and need o allocae more reserves for poenial losses. Since our daa are cross-secional, we canno empirically address his possibiliy. Finally, conrary o our expecaions, we do no find any significan relaion beween inflaion and is long-erm loans raio. Definiely, bank size, GDP growh and capial are he mos imporan and consisen facors in deermining a bank s propensiy no only o lend o businesses bu o lend long erm loans. While long-erm liabiliies and provisions for loan losses are no imporan for deermining a bank s propensiy o lend o business, hey become very imporan in deermining a bank s long-erm lending behavior. Finally, while our explanaory variables explain 72 percen of he variaion we observe in business loans, heir explanaory power increases o 83 percen in explaining he variaion in long-erm business loans. 5. Concluding Remarks This sudy examines he deerminans of bank long-erm lending o businesses in he developing marke conex. By examining bank-level daa in a single counry seing, we are able o conrol for he legal and business environmen characerisics and o provide robus empirical evidence on he deerminans of he bank s propensiy o exend long-erm business loans in a risky developing marke. Using a sample of six counries of he CEMAC banks from 2001 o 2010, we provide srong evidence on he banks relucance o provide business loans wih more han hree years mauriy. The mulivariae es of cross-counries differences in he bank lending decisions reveals ha smaller banks, less capialized banks, banks wih low levels of long erm funding sources, banks wih higher nonperforming loans and operae in recession environmen are more averse o lend long erm. From he broader perspecive, hese resuls confirm ha in addiion o he well-known counry-level obsacles o long-erm financing in emerging markes, such as weak credior righs proecion and enforcemen and low crediworhiness of risky borrowers, here are significan banklevel consrains in providing long-erm loans o firms, including insufficien bank size, low capializaion, and lack of long-erm liabiliies. From he pracical view, hese resuls idenify specific bank-level macroeconomics consrains ha sysemaically affec bank willingness and abiliy o exend long-erm credi o firms. ~ 113 ~

8 ISSNs: ; Academic Research Cenre of Canada References [1] Bae, K. and Goyal, V. K. (2009), Credior righs, enforcemen, and bank loans, Journal of Finance, 64(2): [2] Berger, A. and Udell, G. (1995), Relaionship lending and lines of credi in small firm finance, Journal of Business, 68(3): [3] Bhaumik, S. K., Piesse, J. (2008), Does lending behavior of banks in emerging economies vary by ownership? Evidence from he Indian banking secor, Economic Sysems, 32(2): [4] Bolon, P. and Freixas, X. (2000), Equiy, bonds, and bank deb: Capial srucure and financial marke equilibrium under asymmeric informaion, Journal of Poliical Economy, 108(2): [5] Caprio, G. and Demirgüc-Kun, A. (1998), The role of long-erm finance: Theory and evidence, World Bank Research Observer, 13(2): [6] Claessens, S., Djankov, S. and Nenova, T. (2001), Corporae risk around he world, World Bank Policy Research Working Paper, no [7] De Jong, A., Kabir, R., Nguyen, T. T. (2008), Capial srucure around he world: The role of firm- and counry specific deerminans, Journal of Banking and Finance, 32(9): [8] Demirgüc-Kun, A. and Maksimovic, V. (1999), Insiuions, financial markes, and firm deb mauriy, Journal of Financial Economics, 54(3): [9] Diamond, D. (1984), Financial inermediaion and delegaed monioring, Review of Economic Sudies, 51(3): [10] Diamond, D. (1991), Deb mauriy srucure and liquidiy risk, Quarerly Journal of Economics, 106(3): [11] Diamond, D. (2004), Commiing o commi: Shor-erm deb when enforcemen is Cosly, AFA Presidenial Address, Journal of Finance, 59(4): [12] Esy, B. C. and Megginson, W. L. (2003), Credior righs, enforcemen, and deb ownership srucure: Evidence from he global syndicaed loan marke, Journal of Financial and Quaniaive Analysis, 38(1): [13] Fan, J.P.H., Timan, S., Twie, G. (2006), An inernaional comparison of capial srucure and deb mauriy choices, AFA 2005 Philadelphia Meeings. [On-line]Available a: SSRN: hp://ssrn.com/absrac= [14] Freixas X. and Roche J.C. (2008), Microeconomics of Banking, 2 nd ed, Cambridge: MIT Press. [15] González, V.M. and González, F. (2008), Influence of bank concenraion and Insiuions on capial srucure: New inernaional evidence Journal of Corporae Finance, 14(4): [16] Holmsröm, B. and Tirole, J. (1997), Financial inermediaion, loanable funds, and he real secor, Quar. J. Econ. 112(3): [17] Ongena, S., and Smih, D. ( 2000), Wha deermines he number of bank relaionships? Crosscounry-evidence, J. Financial Inermediaion, 9(1): [18] Oriz-Molina, H. and Penas, M. (2008), Lending o small businesses: The role of loan mauriy in addressing informaion problems, Small Business Economics, 30(4): [19] Peersen, M. A. & Rajan, R. G. (1994), The benefis of lending relaionships: Evidence from small business daa, The Journal of Finance, 49(1): [20] Peersen, M. A. & Rajan, R. G. (1995), The effec of credi marke compeiion on Lending relaionships, Quarerly Journal of Economics, 110(2), [21] Qian, J. & Srahan, P. E. (2007), How laws and insiuions shape financial conracs: The case of bank loans, The Journal of Finance, 62(6): [22] Srahan, P. (1999), Borrower risk and he price and nonprice erms of bank loans, Federal Reserve Bank of New York, Saff Repors No. 90. ~ 114 ~

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