Bank concentration and SME financing availability: the impact of promotion of financial inclusion in China
International Journal of Bank Marketing
ISSN: 0265-2323
Article publication date: 22 July 2020
Issue publication date: 19 August 2020
Abstract
Purpose
The promotion of financial inclusion can disturb the composition of traditional bank concentration and change the relationship between bank concentration and the availability of small and medium-sized enterprise (SME) financing. This paper concentrates on a less frequently explored area of research by examining the relationships between bank concentration, financial inclusion and SME financing availability respectively, and the interaction between bank concentration and financial inclusion after the implementation of a financial inclusion strategy in China.
Design/methodology/approach
Using firm-level data from 1,509 listed SMEs in China from 2007 to 2017 and applying rigorous analyses, we identify how bank concentration affects SME financing availability under the promotion of financial inclusion and also the mechanisms involved.
Findings
We find that bank concentration and financial inclusion respectively have positive impacts on the credit available to listed SMEs, indicating that the promotion of financial inclusion in China has reached a new high watermark. The positive impact of bank concentration is reduced when the level of financial inclusion is high. Conversely, a higher level of financial inclusion favours SME credit availability at only a low degree of bank concentration. Our findings suggest that financial inclusion has a substitution effect on bank concentration and has enabled us to add new interpretations to relevant theories; namely, the Market Power and Information Theories respectively.
Originality/value
This study provides new insights into the relationship between bank concentration and SME finance availability under the promotion of financial inclusion.
Keywords
Acknowledgements
The authors appreciate financial support by the Natural Science Fund of Zhejiang Province, China (Project No: LY19G030011); the National Social Science Fund of China (Project No: 16CJY073); K.C. Wong Magna Fund in Ningbo University. The constructive comments from two anonymous reviewers and professional service from Professor Hooman Estelami (editor) are much appreciated.
Citation
Lu, Z., Wu, J. and Liu, J. (2020), "Bank concentration and SME financing availability: the impact of promotion of financial inclusion in China", International Journal of Bank Marketing, Vol. 38 No. 6, pp. 1329-1349. https://doi.org/10.1108/IJBM-01-2020-0007
Publisher
:Emerald Publishing Limited
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