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Bank market power and SME finance: firm-bank evidence from European countries

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Using unique matched data on SME-bank relationships from 19 European countries, we examine the effects of bank-level market power on SME finance. We show novel evidence that bank market power at disaggregate level reduces SMEs’ access to bank finance and worsens their credit constraints. Whilst, banking market concentration improves credit supply to SMEs. The unfavourable market power effect is stronger for SMEs who are more informationally opaque, riskier and more dependent on external finance. We also show supporting evidence on Information-based Hypothesis where with greater market power, banks are more likely to engage in relationship lending.

Original languageEnglish
Article number101162
Number of pages26
JournalJournal of International Financial Markets, Institutions and Money
Early online date23 Dec 2019
Publication statusEarly online - 23 Dec 2019


  • JIFMIM - with authors names

    Accepted author manuscript (Post-print), 633 KB, PDF document

    Due to publisher’s copyright restrictions, this document is not freely available to download from this website until: 23/12/20

    Licence: CC BY-NC-ND

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