Work

Bank credit to SMEs in Japan: Evidence from normal times, the global financial crisis, and the COVID-19 crisis

Year: 2024

Type: article

Abstract: We investigate what types of small and medium-sized enterprises (SMEs) use bank loans during crisis periods, focusing on the global financial crisis (GFC) and the economic crisis caused by the coronavirus disease 2019 (COVID-19) pandemic. Using comprehensive data on SMEs in Japan , we obtain the following results. First, during these two crisis periods, SMEs with low cash flow, high credit risk, and low sales growth borrowed more from banks. Second, these firms borrowed more during the COVID-19 crisis than during the GFC. Furthermore, the ex post profitability of these firms was lower during the COVID-19 crisis, which was special in that vulnerable firms borrowed more from banks. Third, the increases in probability of default were not large during the early stages of the COVID-19 crisis, but were economically significant in 2021. These results imply that massive financial support during the COVID-19 crisis delayed firm defaults.

Source: Pacific-Basin Finance Journal

DOI: 10.1016/j.pacfin.2024.102500

Author: Daisuke Tsuruta

Institution: Nihon University

Language: English

Topic: Banking stability, regulation, efficiency

Subfield: Finance

Field: Economics, Econometrics and Finance

Domain: Social Sciences

SDG: Decent work and economic growth

Open Access status: hybrid

Estimated APC paid: $2,820