Demand and Supply Determinants of Credit Availability: Evidence from the Current Credit Crisis for European SMEs

The aim of this chapter is to examine the importance of demand and supply factors in determining credit availability during the recent financial crisis for a different sample of small- and medium-sized enterprises (SMEs) in some principal European countries. A first investigation suggests that during crisis time, the credit demand is mainly driven by liquidity problems. As for the determinants of credit demand, it emerges a different pattern among countries more bank than market oriented. Then, controlling for the supply of credit two types of credit rationing have been investigated. Weak rationing defines that condition for which firms asking for credit at the same interest rate did not receive it. To be strongly bank dependent implies a greater probability to be weakly credit rationed in crisis times. Differently solid accounting data, collateral and greater size may loosen such a condition. Finally, we control for strong rationing, i.e., the condition for which a firm even if ready to accept worse interest rates is subject to rationing. Evidence suggests that relationship-lending attitude as well as larger size could weaken the rationing condition; differently collateral as well as R&D propensity may exacerbate it because of moral hazard risk and higher information asymmetries.