We thank doctor Giovanni Butera of Moody's KMV for kindly providing data on firms' risk. We are also grateful to two anonymous referees for their helpful comments and suggestions on previous versions of the paper.
The Effects of Screening and Monitoring on Credit Rationing of SMEs
Article first published online: 25 NOV 2008
© 2008 The Authors Journal compilation © 2008 Banca Monte dei Paschi di Siena SpA.
Volume 37, Issue 2, pages 155–179, July 2008
How to Cite
Agostino, M., Silipo, D. B. and Trivieri, F. (2008), The Effects of Screening and Monitoring on Credit Rationing of SMEs. Economic Notes, 37: 155–179. doi: 10.1111/j.1468-0300.2008.00195.x
- Issue published online: 25 NOV 2008
- Article first published online: 25 NOV 2008
In this paper, we seek to empirically assess which determinants of the capability and incentives of banks to screen and monitor firms are significant in explaining credit rationing to Italian SMEs. After testing for the presence of non-random selection bias and the potential endogeneity of some determinants of interest, the probit model results we obtain suggest that the average banking size and the multiple banking relationship phenomenon are statistically significant factors affecting credit rationing, presumably through their impact on the aforementioned banks' capability and incentives. Other potential determinants of banks' incentives to monitor and screen, such as local banking competition and firm' capacity to collateralize, are never significant. However, when we split the sample according to the level of competition in credit markets, we find that the estimated marginal effects of all significant determinants of interest are larger in absolute value than those obtained when using the whole sample.