Thesis (Ph. D.)--University of Texas at Austin, 2002. / Vita. Includes bibliographical references. Available also from UMI Company.

The growth of small- and medium-sized enterprises (SME) accounts for a disproportionate share of employment, economic growth and prosperity (Adelino et al., 2017). However, it has been argued that SMEs suffer from severe information asymmetry and other types of market frictions and, thus, are more likely subject to credit constraints (Berger and Udell, 1998). This PhD thesis addresses this issue from three different, yet interrelated, perspectives: the relationship between SME growth and credit constraints; the impacts of firm characteristics on the full scope of the SME debt acquisition process; and the effectiveness of a credit guarantee scheme (CGS). The latter is a widely-used form of policy initiative that seeks to address SME credit constraints. Accordingly, this thesis comprises three chapters and draws on empirical analyses of unique datasets from Statistics Canada surveys, conducted from 2011 to 2017. The first chapter of this dissertation investigates the impacts of demand- and supply-side credit constraints on SME growth. It finds that evidence consistent with the premise that growth-oriented firms that apply and obtain either term loans or trade credit experience higher short-term growth than demand-constrained and supply-constrained firms. In the longer term, growth-oriented firms that apply and obtain term loans experience higher growth in revenues than supply-constrained firms. The second chapter estimates the three stages of the SME debt acquisition process (i.e., recognizing a need for capital, applying for a loan, and being approved for a loan) using a trivariate probit model that accounts for the correlation among the three stages of the SME debt acquisition process. It finds that while innovators and exporters are relatively more likely to need external financing, they do not face demand- or supply-side constraints. Conversely, firms majority-owned by women and members of visible minority groups are more likely to need credit, are more likely to be demand-constrained and are subject to statistical discrimination when seeking credit. When changing the definition of demand-constrained borrowers to a more narrow definition, innovators are relatively more likely to apply for needed financing, exporters are relatively less likely to do so, and visible minorities are relatively just as likely to apply for needed financing. The third chapter proposes a new means of assessing the economic impact of the Canadian CGS, the Canada Small Business Financing (CSBF) program. The Canadian CGS is a mechanism by which the Government of Canada guarantees a specific portion of a loan in the event of default. The new measure improves on an existing measure that seeks to evaluate the performance of CGSs: the incrementality rate (a measure that evaluates the extent to which loans advanced under the CGS program would not otherwise have been approved by lenders—the counterfactual). The new measure developed in this chapter gauges lenders’ moral hazard; that is, the extent to which lenders take excessive risks by betting on overly risky loans because they know that the losses would be covered by the program. This cannot be captured by the incrementality rate. The chapter reports on the evaluation of the CSBF performance based on both measures, the traditional incrementality rate and the new measure of lenders’ excess risk taking. It finds that the CSBF is not incremental, with a low incrementality rate of 5.3 per cent. The findings also suggest that lenders do not engage in excessive risk-taking behavior, as evidenced by an almost zero risk-taking rate. While Canadian banks do not particularly exhibit a willingness to allocate guaranteed loans to women and visible minorities (the groups of firms that are subject to statistical discrimination per Chapter II), they tend to allocate more guaranteed loans to growth-oriented borrowers, consistent with the CSBF’s objective to support the growth of small businesses (ISED Canada, 2016). Finally, the CSBF incrementality rate does not vary significantly between recession (following the 2007-2008 crisis) and post-recession time periods.

Thesis advisor: Philip E. Strahan / In the first essay of this dissertation, I study the information synergies between deposit-taking and lending activities of large banks. I use the influx of Chinese international students into US universities to identify a local deposit shock. I find that banks that are more exposed to this shock increase their local credit supply in small business loans, but not mortgages. The results support the notion that deposit can be informative: it conveys signals about local economic activities. Such information affects banks expectation about future local demand and thus banks’ lending decisions. The second essay investigates the relationship between banks geographic concentration and liquidity risk management. I find that geographic concentrations measured on different sides of banks’ balance sheet have opposite effects on banks’ liquidity risk management behaviors during the 2007-2009 liquidity crisis. The overall results are consistent with the view in the literature that geographic concentrated banks invest more in soft information production. / Thesis (PhD) — Boston College, 2018. / Submitted to: Boston College. Carroll School of Management. / Discipline: Finance.

The subject of this thesis is to map the development of p2p lending in the US. Firstly, we compare the different business models and roles in the current monetary system of commercial banks and p2p platform lenders. The structure as well as trends of p2p lending industry are described. The returns of p2p loans are compared with traditional assets such as bonds, stocks and commodities in the 2011-2016 period. The last part of the thesis examines the loanbook of the most prominent p2p platform lender, Lending Club.

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For many decades both UK and US politicians have encouraged homeownership supported by mortgage lending. Exuberant borrowing has fuelled housing booms and is central to many recent financial problems. As a consequence macroprudential policies have been developed to improve financial stability using a mixture of measures to deter excessive lending including loan-to-value and debt-to-income restrictions. This thesis considers macroprudential policymaking generally and, more specifically, this latter group of macroprudential measures. It concludes that it is unlikely that these measures can be used to any significant extent in western democracies. At its heart is their political legitimacy and the potential consequences for the institutions promulgating such policies since a major use of these limits would have a direct and very visible effect on home ownership aspirations. Further, the evidence indicates that these measures may well be ineffective. This thesis suggests that conduct of business regulatory policy and the use of mortgage affordability verification may be more effective. However, the successful employment these measures for macroprudential purposes may be hindered by the structure of UK financial services regulation. Moreover, there is a challenge in that historically, UK conduct of business regulation has often failed. Nevertheless, in the area of mortgage affordability, there may be opportunities to use innovative regulatory policies to reduce these risks going forward. Further, there may be lessons for the UK from the US's approach of using the concept of the "qualified mortgage" and, additionally, in considering the role of sound conduct of business policies such as those are used by the US Veterans Administration. Nevertheless, the failure to build sufficient homes over the last forty years is at the heart of UK financial instability. Macroprudential policy may have the unequal task of attempting to suppress house price booms. This raises political issues and highlights the constraints on macroprudential policy with limits on its ability to influence fiscal and socio-economic policy. This thesis seeks to influence the debate on what can be done to help to ensure financial stability.

Thesis (M.B.A.)--Boston University

Over the years, the lending procedures of microcredit has evolved. The original joint liability group lending with simultaneous financing (loans released at once) has been replaced by sequential financing (loans released one by one). Moreover, recent studies suggest individual liability lending in groups to be the optimal choice. While numerous theoretical studies provide thorough models of each of these approaches, none presents a comparative analysis. In this study, we model these three schemes using the framework by Van Tassel (1999) and compare them. Further, we add exogenous peer monitoring costs and within-group heterogeneity of loan sizes to our models. Our findings prove that, in the presence of information asymmetry, group lending with joint liability dominates individual liability lending in groups. Furthermore, the interest rate of the sequential model is more sensitive to changes of monitoring costs or opportunity costs of capital than in the sequential model. On the contrary, sequential approach allows for higher degree of within-group heterogeneity of loan sizes. It is ambiguous which model achieves higher profit and lower interest rate. Our results confirm that the choice of optimal financing approach is determined by the characteristics of borrowers. JEL Classificiation G2 Keywords...

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Bangladesh reformed its corporate governance by adopting Bangladesh Corporate Governance Guidelines-2006 (the BCGG-2006 hereafter) due to pressures from international financial institutions (IFIs). However, there is huge controversy in prior literature regarding the IFIs’ suggested reform initiatives. The thesis asks specific research questions: RQ1. Do institutional investors and bankers in Bangladesh perceive that the level of compliance with the BCGG-2006 by the investee or borrowing company influences the investment and lending decisions respectively? RQ2.1. To what extent is the BCGG-2006 implemented in form rather than in substance? RQ2.2 Is there a relationship between the nature of compliance with the BCGC-2006 and firm performance? RQ3.1. To what extent does reported compliance with the BCGG-2006, as reported in annual reports, overstate underlying compliance with the BCGC-2006? RQ3.2 Does the overstatement of compliance reported in annual reports lead to a different relative ranking of a firm’s corporate governance structure? RQ3.3 What factors influence the overstatement of compliance with the BCG-2006 in annual reports? To investigate RQ1, an inductive approach is taken and data are collected by using semi-structured interviews of investment managers and credit rating analysts. In order to examine the remaining RQs, a deductive approach is taken and data are collected: (1) by using a structured survey questionnaire addressed to company secretaries or CFOs; and (2) from annual reports and stock exchanges. With respect to RQ1, this study finds (1) strong evidence that institutional investors and bankers perceive limited impact of corporate governance mechanisms recommended by the BCGG-2006 on investment and lending decisions respectively. In order to theorise the above findings, two theories: agency theory and the theory of path dependence are contrasted. Using a grounded theory coding, this study finds that (1) companies are locked in the path of control by sponsor families and sponsor families then impede the implementation of the BCGG-2006 and (2) institutional investors and bankers lock themselves in the path of name-based and relationship-based investment and lending practices which deters consideration of corporate governance mechanisms introduced by the BCGG-2006. Very few interviewees provide an explanation consistent with the agency theory. This evidence thus points more to the theory of path dependence than to agency theory. In relation to RQ2.1, this study finds that local privately-owned companies and government-owned companies either do not comply or comply in form but not in substance with the BCGG-2006, while subsidiaries of foreign multinational companies comply in form and in substance with the BCGG-2006. The relative strength of path dependence in local privately-owned companies and government-owned companies and subsidiaries of foreign multinational companies explains these results better than agency theory. The evidence with respect to RQ2.2 provides an indication that the nature of compliance with separation of the chairman and CEO, board independence and audit committee does not have an association with firm performance in case of local privately-owned companies. However, the evidence in relation to RQ2.2 provides an indication that the nature of compliance with the corporate governance mechanisms introduced by the BCGG-2006 makes a difference in firm performance in subsidiaries of foreign multinational companies. With respect to RQ3.1, it is found that companies overstate compliance with the BCGG-2006 in annual reports. With respect to RQ3.2, this study finds that the rank of a firm’s corporate governance is different when comparing compliance with the BCGG-2006 as reported in annual reports with compliance with the BCGG-2006 as stated in the survey. With respect to RQ3.3, it is found that overstatement of compliance is more pronounced with respect to less-observable provisions of the BCGG-2006, is positively associated with control by sponsor families and is negatively associated with control by institutional investors. This evidence is again more consistent with the theory of path dependence and institutional logic than agency theory. The findings of this thesis suggest that corporate governance researchers in developing countries should consider the role of path dependence rather than agency theory exclusively. This thesis also makes a methodological contribution by investigating overstatement of compliance with the BCGG-2006. The findings of this study may also assist regulators in developing countries and the IFIs in formulating future governance guidelines for developing countries.