Credit Rationing in Small and Micro Enterprises: A Theoretical Analysis
One of the features of credit markets is that borrowers are sometimes rationed in the amount that they can borrow, which differentiates them from other markets. Small and micro enterprises (SMEs) are more likely to be eliminated than large and medium-sized enterprises under credit rationing. However...
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Online Access: | http://www.mdpi.com/2071-1050/11/5/1330 |
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doaj-0d9ac46215b94ad2affc490220e0a74a2020-11-24T21:14:50ZengMDPI AGSustainability2071-10502019-03-01115133010.3390/su11051330su11051330Credit Rationing in Small and Micro Enterprises: A Theoretical AnalysisYuhuan Jin0Sheng Zhang1School of Public Policy and Administration, Xi’an Jiaotong University, Xi’an 710049, ChinaSchool of Public Policy and Administration, Xi’an Jiaotong University, Xi’an 710049, ChinaOne of the features of credit markets is that borrowers are sometimes rationed in the amount that they can borrow, which differentiates them from other markets. Small and micro enterprises (SMEs) are more likely to be eliminated than large and medium-sized enterprises under credit rationing. However, SMEs play a significant role in employment creation and growth of gross domestic products in developing countries. So, it is of great significance to study the reasons why SMEs are more vulnerable to credit constraints. By considering the differences in characteristics between SMEs and large and medium-sized enterprises, we established a theoretical model with endogenous enterprise size, and by considering banks’ screening principles before and after the loan approval, we have analyzed the micro-mechanism in which there are significant differences in credit availability between SMEs and large and medium-sized enterprises. Our conclusion indicates that credit rationing in SMEs is the result of the rational choice by banks for the purpose of profit maximization.http://www.mdpi.com/2071-1050/11/5/1330financing constraintasymmetric informationsmall and micro enterprisescredit rationingbig data |
collection |
DOAJ |
language |
English |
format |
Article |
sources |
DOAJ |
author |
Yuhuan Jin Sheng Zhang |
spellingShingle |
Yuhuan Jin Sheng Zhang Credit Rationing in Small and Micro Enterprises: A Theoretical Analysis Sustainability financing constraint asymmetric information small and micro enterprises credit rationing big data |
author_facet |
Yuhuan Jin Sheng Zhang |
author_sort |
Yuhuan Jin |
title |
Credit Rationing in Small and Micro Enterprises: A Theoretical Analysis |
title_short |
Credit Rationing in Small and Micro Enterprises: A Theoretical Analysis |
title_full |
Credit Rationing in Small and Micro Enterprises: A Theoretical Analysis |
title_fullStr |
Credit Rationing in Small and Micro Enterprises: A Theoretical Analysis |
title_full_unstemmed |
Credit Rationing in Small and Micro Enterprises: A Theoretical Analysis |
title_sort |
credit rationing in small and micro enterprises: a theoretical analysis |
publisher |
MDPI AG |
series |
Sustainability |
issn |
2071-1050 |
publishDate |
2019-03-01 |
description |
One of the features of credit markets is that borrowers are sometimes rationed in the amount that they can borrow, which differentiates them from other markets. Small and micro enterprises (SMEs) are more likely to be eliminated than large and medium-sized enterprises under credit rationing. However, SMEs play a significant role in employment creation and growth of gross domestic products in developing countries. So, it is of great significance to study the reasons why SMEs are more vulnerable to credit constraints. By considering the differences in characteristics between SMEs and large and medium-sized enterprises, we established a theoretical model with endogenous enterprise size, and by considering banks’ screening principles before and after the loan approval, we have analyzed the micro-mechanism in which there are significant differences in credit availability between SMEs and large and medium-sized enterprises. Our conclusion indicates that credit rationing in SMEs is the result of the rational choice by banks for the purpose of profit maximization. |
topic |
financing constraint asymmetric information small and micro enterprises credit rationing big data |
url |
http://www.mdpi.com/2071-1050/11/5/1330 |
work_keys_str_mv |
AT yuhuanjin creditrationinginsmallandmicroenterprisesatheoreticalanalysis AT shengzhang creditrationinginsmallandmicroenterprisesatheoreticalanalysis |
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1716746025481273344 |