Affiliation:
1. Oxford Brookes University, UK
2. University of Leeds, UK
3. University of Sussex, UK
4. University of Economics in Bratislava, Slovakia
Abstract
Using data between 2009 and 2020, we provide a detailed description of the borrowers within the Enterprise Finance Guarantee (EFG) loan portfolio, analyse time to default and how it differs across lender types. For limited companies, we match additional financial and non-financial data from public and proprietary databases and profile the characteristics of EFG companies within the population of limited companies. Employing hazard models we find loans granted to unincorporated businesses by the medium-sized financial institutions are associated with a much lower hazard than those provided by smaller local lending institutions and not-for-profit agencies. Moreover, we find some evidence that loans to limited companies, issued by the big UK banking groups, have a significantly lower default than those from medium-sized financial institutions. Large banks screen out high-risk firms. We argue that smaller lenders are able to price the risks rejected by the larger banks, using a wider range of credit information.JEL codes: G01, G21, L52, D25
Funder
Economic and Social Research Council
Department for Business, Energy and Industrial Strategy, UK Government
Subject
Business and International Management
Cited by
3 articles.
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