Empirical Study of the Trust Relationship between Banks and Small and Micro-enterprises

Abstract

Abstract:

The trust relationship between lending banks and borrowing enterprises helps mitigate information asymmetry, so it can be considered as a key entry point to improve the lending to small and micro-enterprises. Though the trust relationship between banks and enterprises is receiving more and more attention, current studies focus on the trust from bank side, and ignore the issue from the borrowing enterprise side. This paper presents an empirical study on the small and micro-enterprise's trust in bank based on the survey data collected from two provinces in China, Hunan and Guangdong. Our results show that:(1) a higher level of trust that a small and micro-enterprise endows in bank is positively correlated with its credit availability, (2) small and micro-enterprise's trust in bank reduces the probability of it being discouraged from applying for a bank loan, (3) firm characteristics, personal traits of firm owner and relational factors are all the determinants of small and micro-enterprise's trust in bank.

Key words: small and micro-enterprise, bank-firm relationship, trust, discouragement, credit availability

Tang Ying, Deng Chao. Empirical Study of the Trust Relationship between Banks and Small and Micro-enterprises[J]. , 2017, 29(9): 37-47.

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