title: Bank Size and Small- and Medium-sized Enterprise (SME) Lending: Evidence from China.
abstract: Using panel data collected in 2005, we evaluate how bank size, discretion over credit, incentive schemes, competition, and the institutional environment affect lending to small- and medium-sized enterprises in China. We deal with the endogeneity problem using instrumental variables, and a reduced-form approach is also applied to allow for weak instruments in estimation. We find that total bank asset is an insignificant factor for banks' decision on small- and medium-enterprise (SME) lending, but more local lending authority, more competition, carefully designed incentive schemes, and stronger law enforcement encourage commercial banks to lend to SMEs.
authors.affiliation: Peking University, PR China.
authors.forename: Yan
authors.initials: Y
authors.lastname: Shen
authors.affiliation: Peking University, PR China.
authors.forename: Minggao
authors.initials: M
authors.lastname: Shen
authors.affiliation: Finance and Banking Research Institute, People's Bank of China, PR China.
authors.forename: Zhong
authors.initials: Z
authors.lastname: Xu
authors.affiliation: Hong Kong University of Science and Technology, PR China.
authors.forename: Ying
authors.initials: Y
authors.lastname: Bai
keywords: SME lending; bank size; loan approval rights; reduced-form approach; soft information