Abstract
We investigate the impact of banks’ capability to recover a loan on firms’ propensity to apply for credit and on banks’ propensity to lend, looking at firms from eleven European countries. Our findings suggest that banks’ recovery rates negatively affect firms’ decisions to apply for credit but not banks’ decision to provide credit. We also find that the role of recovery rates differs in economically weak and strong contexts: high recovery rates discourage borrowers only in economically strong countries and have a positive impact on banks’ lending decisions in economically weak countries.
JEL
G21
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Moro, A., Maresch, D., Ferrando, A., Barbar, J. (2017). Neither a Borrower Nor a Lender Be! Loan Application and Credit Decision for Young European Firms. In: Rossi, S. (eds) Access to Bank Credit and SME Financing. Palgrave Macmillan Studies in Banking and Financial Institutions. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-319-41363-1_2
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DOI: https://doi.org/10.1007/978-3-319-41363-1_2
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