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Research output: Contribution to Journal/Magazine › Journal article › peer-review
Research output: Contribution to Journal/Magazine › Journal article › peer-review
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TY - JOUR
T1 - Discouraged borrowers aftermath of financial crisis
T2 - a UK study
AU - Rostamkalaei, Anoosheh
N1 - This article is (c) 2017 Emerald Group Publishing and permission has been granted for this version to appear here. Emerald does not grant permission for this article to be further copied/distributed or hosted elsewhere without the express permission from Emerald Group Publishing Limited.
PY - 2017/4
Y1 - 2017/4
N2 - PurposeThe purpose of this paper is to investigate the trend of discouragement in the SME’s lending market during the aftermath of the financial crisis of 2008. It detects the extent to which the responses of discouraged firms to improvements in the lending market are lagged.Design/methodology/approachThe results are based on surveys of UK SME Finance Monitor (2011-2016). Probit regression models were used to assess the effect of time passed from the financial crisis on the probability of discouragement.FindingsThe analysis, inter alia, shows that the rate of discouragement has reduced significantly since 2013. The results highlight the long-term effect of tightened credit supply on SMEs that are ready to invest, but hold back because of fear of rejection.Practical implicationsThe research suggests addressing imperfect information among discouraged SMEs that are recuperating from the financial crisis. With the rise of information asymmetry, entrepreneurs show a higher level of fear of rejection by financial institutions. The longer the effects of the financial crisis exists among entrepreneurs, the longer they self-ration from credit market, which subsequently leads to reduced levels of investment, growth, and innovation among SMEs.Originality/valueThis research fills a gap in the literature of the effect of financial crisis on the latent demand for lending. It discusses the long-term effect of tightened credit supply among entrepreneurs even though the supply side has recuperated and recommenced pre-crisis activities.
AB - PurposeThe purpose of this paper is to investigate the trend of discouragement in the SME’s lending market during the aftermath of the financial crisis of 2008. It detects the extent to which the responses of discouraged firms to improvements in the lending market are lagged.Design/methodology/approachThe results are based on surveys of UK SME Finance Monitor (2011-2016). Probit regression models were used to assess the effect of time passed from the financial crisis on the probability of discouragement.FindingsThe analysis, inter alia, shows that the rate of discouragement has reduced significantly since 2013. The results highlight the long-term effect of tightened credit supply on SMEs that are ready to invest, but hold back because of fear of rejection.Practical implicationsThe research suggests addressing imperfect information among discouraged SMEs that are recuperating from the financial crisis. With the rise of information asymmetry, entrepreneurs show a higher level of fear of rejection by financial institutions. The longer the effects of the financial crisis exists among entrepreneurs, the longer they self-ration from credit market, which subsequently leads to reduced levels of investment, growth, and innovation among SMEs.Originality/valueThis research fills a gap in the literature of the effect of financial crisis on the latent demand for lending. It discusses the long-term effect of tightened credit supply among entrepreneurs even though the supply side has recuperated and recommenced pre-crisis activities.
KW - Discouraged borrower
KW - Lending
KW - SME
KW - Bank
KW - financial crisis
U2 - 10.1108/JSBED-09-2016-0137
DO - 10.1108/JSBED-09-2016-0137
M3 - Journal article
VL - 24
SP - 394
EP - 410
JO - Journal of Small Business and Enterprise Development
JF - Journal of Small Business and Enterprise Development
SN - 1462-6004
IS - 2
ER -