Basel III Implementation and SME Financing
This paper examines the effect of Basel III implementation on the access to finance of small and medium-size enterprises in 32 emerging markets and developing economies. Analyzing rich, repeated cross-sectional data and a panel of matched firm-bank data in a difference-in-differences setting with sample selection adjustment, the authors find a short-term, moderately negative effect of Basel III on small and medium-size enterprises' access to financing. The results suggest that firms with access to bank credit prior to Basel III implementation could have been affected less than firms that were initially on the fringes of financial inclusion—firms with only a bank account. The paper fails to find any additional heterogeneous effects across firm size or age, bank capitalization or liquidity, or across countries that transitioned to Basel III from Basel II versus Basel 2.5. Overall, the initial conditions of the banking system as well as of complementary business and financial regulation can co-determine the size of short-term costs from the newly implemented global financial regulation in emerging markets and developing economies.
| Main Authors: | , , |
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| Format: | Working Paper biblioteca |
| Language: | English |
| Published: |
World Bank, Washington, DC
2019-12
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| Subjects: | BANK REGULATION, BASEL III, FINANCIAL REGULATION, SMALL AND MEDIUM-SIZED ENTERPRISES, SME FINANCE, FIRM-LEVEL DATA, IMPACT EVALUATION, EMERGING MARKET ECONOMIES, |
| Online Access: | http://documents.worldbank.org/curated/en/441951575300867782/Basel-III-Implementation-and-SME-Financing-Evidence-for-Emerging-Markets-and-Developing-Economies https://hdl.handle.net/10986/33011 |
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| Summary: | This paper examines the effect of Basel
III implementation on the access to finance of small and
medium-size enterprises in 32 emerging markets and
developing economies. Analyzing rich, repeated
cross-sectional data and a panel of matched firm-bank data
in a difference-in-differences setting with sample selection
adjustment, the authors find a short-term, moderately
negative effect of Basel III on small and medium-size
enterprises' access to financing. The results suggest
that firms with access to bank credit prior to Basel III
implementation could have been affected less than firms that
were initially on the fringes of financial inclusion—firms
with only a bank account. The paper fails to find any
additional heterogeneous effects across firm size or age,
bank capitalization or liquidity, or across countries that
transitioned to Basel III from Basel II versus Basel 2.5.
Overall, the initial conditions of the banking system as
well as of complementary business and financial regulation
can co-determine the size of short-term costs from the newly
implemented global financial regulation in emerging markets
and developing economies. |
|---|