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Does bank efficiency influence the cost of credit?

Shamshur, Anastasiya, Weill, Laurent (2019) Does bank efficiency influence the cost of credit? Journal of Banking and Finance, 105 . pp. 62-73. ISSN 0378-4266. (doi:10.1016/j.jbankfin.2019.05.002) (KAR id:78276)

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http://dx.doi.org/10.1016/j.jbankfin.2019.05.002

Abstract

Using a large sample of firms from nine European countries, this study examines the relationship between bank efficiency and the cost of credit for borrowing firms. We hypothesize that bank efficiency – the ability of banks to operate at lower costs – is associated with lower loan rates and thus lower cost of credit. Combining firm-level and bank-level data, we find support for this prediction. The effect of bank efficiency on the cost of credit varies with firm and bank size. Bank efficiency reduces the cost of credit for SMEs, but does not exert a significant influence for either micro companies or large firms. Furthermore, the effect is driven by large banks, where improvements in bank efficiency tend to be strongly associated with lower cost of credit. We also find that lower bank competition facilitates the transmission of greater bank efficiency to lower cost of credit. Overall, our results indicate that measures that increase bank efficiency can foster access to credit. © 2019 Elsevier B.V.

Item Type: Article
DOI/Identification number: 10.1016/j.jbankfin.2019.05.002
Uncontrolled keywords: Bank efficiency ; Cost of credit; cequfin
Subjects: H Social Sciences
Divisions: Divisions > Kent Business School - Division > Department of Accounting and Finance
Depositing User: Anastasiya Shamshur
Date Deposited: 08 Nov 2019 14:47 UTC
Last Modified: 04 Feb 2022 13:26 UTC
Resource URI: https://kar.kent.ac.uk/id/eprint/78276 (The current URI for this page, for reference purposes)
Shamshur, Anastasiya: https://orcid.org/0000-0002-5091-5837
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