The New Capital Accord (henceforth, Basel II), is expected to impose
dramatic changes on banks and other providers of corporate financing, as
well as companies. Literature indicates that small and medium sized
enterprises (henceforth SMEs), in general, and in particular German SMEs
seem to be affected: Germany has the highest SME density with SMEs
comprising 99.6% of all corporations (IMF, 2008), these SMEs are highly
dependent on banks for financing (see Jacobson et al, 2006). However, there
is huge controversy in the literature concerning how these changes will look,
right before Basel II came into effect in the years 2007 / 2008 in the
European Union. In order to explore this effect from a Post-Basel II
perspective, the objective of this research project is to establish what effect
Basel II will have on corporate financing of SMEs in Germany.
The high impact on SMEs (in Germany), combined with controversial
evidence from extant Pre-Basel II research, indicates a high relevance to
academics and practitioners for this thesis. This thesis is probably the first
from a Post-Basel II perspective which covers both the SMEs' as well as
the financiers' perspective.
Based on a structured literature review using the comparative method
(Peters, 1998) 'Most Different Systems' evidence is provided that there is no
consistent picture regarding the effect of Basel II. Therefore, further research
is needed to determine whether the effect in Germany is consistent, from a
Post-Basel II perspective, with regards to the conditions which trigger certain
mechanisms, from a 'scientific realism' (Smith, 1998) perspective, because
the literature indicates that 'positivist generalising' has limited validity.
Building on Creswell (2003), an 'exploratory sequential' design was created
to test three initial hypotheses (as confirmation or refutation of a theory, see Gujarati, 2003:8): a multi-method design is best suited to the author's
philosophical stance of 'scientific realism' by means of triangulation (Robson,
2002:174). The result of the initial quantitative phase is based on the analysis
of questionnaire data from 125 SMEs and financiers (banks, private equity
companies, family offices, providers of alternative means of financing) derived
from a probabilistic sample frame in the fourth quarter of 2008. Mathematical
models for SMEs and financiers regarding the three initial hypotheses
were set-up and tested using the appropriate statistical tests. In order to limit
bias by means of a spill-over effect from the financial crises, control
questions were used. The subsequent qualitative phase by means of semistructured
elite interviews (Saunders et al, 2007:312) between March and
May 2009 enabled a valid triangulation and provided in-depth insights into
how SMEs can cope best with Basel II. The purposive sample, of 17 'important
cases', included company owners and top-level financier executives.
In a conclusive quantitative and qualitative synopsis, the three initial
hypotheses were acknowledged. However, the qualitative in-depth analysis
by means of 'causal networks' (Miles and Huberman, 1994) led to an
amendment of the hypotheses as follows:
1. Corporate finance has become different for SMEs because the 'house
bank principle' has changed to a 'core bank principle' due to Basel II.
Shopping around regarding credits will be more difficult which makes
financing more difficult. This could be overcompensated by major SMEs,
by using non-credit corporate financing which leads to a reduction of the
'house bank' principle.
2. SMEs can cope best with the effect when they:
a) proactively engage in rating and improve the parameters, or
b) they adjust their strategy as stated in hypothesis 3.
3. Financiers (especially non-bank financiers) will engage in SME corporate
finance when they have a sound financial basis / management and when
they adjust their strategy in terms of growth with the aim of niche market
leadership and when they open up for exit strategies.
| Identifer | oai:union.ndltd.org:BRADFORD/oai:bradscholars.brad.ac.uk:10454/5206 |
| Date | January 2011 |
| Creators | Schmid, Bernhard |
| Contributors | Letza, Steve, Pike, Richard H. |
| Publisher | University of Bradford, School of Management |
| Source Sets | Bradford Scholars |
| Language | English |
| Detected Language | English |
| Type | Thesis, doctoral, DBA |
| Rights | <a rel="license" href="http://creativecommons.org/licenses/by-nc-nd/3.0/"><img alt="Creative Commons License" style="border-width:0" src="http://i.creativecommons.org/l/by-nc-nd/3.0/88x31.png" /></a><br />The University of Bradford theses are licenced under a <a rel="license" href="http://creativecommons.org/licenses/by-nc-nd/3.0/">Creative Commons Licence</a>. |
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