Credit Market Development Research Articles

The impact of formal and informal credit institutions on entrepreneurship

Purpose How do informal lending institutions affect entrepreneurship? This paper aims to investigates the role of formal and informal credit market institutions in the decision to become an entrepreneur over the life cycle. Design/methodology/approach The author developed a dynamic Roy model in which a decision to become an entrepreneur depends on the access to formal and informal credit markets, nonpecuniary benefits of entrepreneurship, career-specific entry costs, prior work experience, education, unobserved abilities and other labor market opportunities (salaried employment and nonemployment). Using detailed Russian panel microdata (the Russia longitudinal monitoring survey) and estimating a structural model of labor market decisions and borrowing options, the author assesses the impact of the development of informal and formal credit institutions. Findings The expansion of traditional (formal) credit market institutions positively impacts all workers’ categories, reduces the share of entrepreneurs who borrow from informal sources and incentivizes low-type entrepreneurs to switch to salaried employment. The development of the informal credit market reduces the percentage of high-type entrepreneurs who borrow from formal sources. In the case of default, a higher value of the social network or higher costs of losing social ties demotivate low-type entrepreneurs to borrow from informal sources. The author highlights the practical implications of estimates by evaluating policies designed to promote entrepreneurship, such as subsidies and accessibility regulations in credit market institutions. Originality/value This study contributes to the literature in several ways. Unlike other studies that focus on individual characteristics in the selection for self-employment [Humphries (2017), Hincapíe (2020), Gendron-Carrier (2021), Dillon and Stanton (2017)], the paper models labor and borrowing decisions jointly. Previous studies discuss transitions between salaried employment and self-employment, taking into account entrepreneurial earnings, wealth, education and age, but do not consider the availability of financial institutions as a driving factor for the selection into self-employment. To the best of the author’s knowledge, this paper shows for the first time that the transition from salaried employment to self-employment is standard and consistent with changes in access to financial institutions. Another feature of this study is incorporating both types of credit markets – formal and informal. The survey by the European Central Bank on the Access to Finance of Enterprises (2018) shows 18% of small and medium enterprise in EU pointed funds from family or friends. Therefore, the exclusion from consideration of informal credit markets may distort the understanding of the role of the accessibility of credit markets.

Bank deregulation and corporate social responsibility

We show how external credit market development can affect corporate social responsibility. Using a sample of US public firms over the period 1991–2010, we find that bank deregulation negatively affects CSR performance. We argue that deregulation-induced banking competition enhances credit accessibility, thereby reducing firms’ incentives to pursue CSR as a means of securing stakeholder rewards. Empirical evidence shows that firms increase their use of debt financing in response to the intensified banking competition, and these firms experience a more pronounced decline in CSR performance. We alleviate the potential concern that the observed decline in CSR could be attributed to changes in bank monitoring following deregulation. Further analyses find that firms reduce CSR regardless of their material nature, suggesting that the primary driver of CSR could be the trade-off between costs and returns. Overall, our findings shed light on the strategic motives of CSR, which exhibits adaptability in response to business dynamism.

Study of factors modeling the development of banking ecosystems

Subject. The article addresses banking ecosystems being a result of integration processes of the credit market and technological development. Such transformations lead to new business models, forms of cooperation and communication. Therefore, business ecosystems and environmental factors impacting them, require a thorough analysis to model the future direction of these phenomena development. Objectives. The study aims to identify external and internal environmental factors of banking business that had the greatest impact on ecosystems development. Methods. We employ general scientific methods of comparison and generalization, methodological, statistical, and graphical analysis of empirical data, marketing methods for studying the business and competitive environment, the SWOT analysis of strengths and weaknesses, opportunities and threats to ecosystems functioning. Results. Following the assessment of the banking business environment, we systematized into two groups (external and internal) the environmental factors of ecosystems that had the maximum impact on processes of transformational change, identified strengths and weaknesses of ecosystems, and correlated the influence of factors on the level of digitalization of the banking sector. Conclusions. The article provides an empirical analysis of business environment for banking ecosystems functioning, identifies the main factors that model the further transformation of the banking business and their impact on digitalization of the sector. Consideration of underlying environmental factors will help ecosystem participants to interact most effectively in the financial and non-financial markets. The findings will enable banking analysts to build forecasts and scenarios for future development of the ecosystem model of banking business, to assess potential opportunities and threats to the industry.

Russian consumer lending market in modern conditions

In the current conditions, the Russian financial market has demonstrated its stability and ability to promptly respond to the ongoing changes in the geopolitical sphere, while the banks that control more than 80 % of the country’s assets are under sanctions. The article considers and analyzes the Russian consumer lending market in modern conditions. It reviews the crisis periods of the Russian financial market from 2014 to 2023 and the anti-crisis measures of the Central Bank of the Russian Federation, the domestic consumer credit market in the current realities, and loans restructuring to individuals under sanctions pressure. The purpose of the study is to determine main trends in the consumer credit market development based on the analysis of the Russian consumer credit market under sanctions pressure. The object of the study is the domestic consumer credit market in modern conditions. The subject of the study is trends in the Russian consumer credit market development under sanctions pressure. The sources of information were analytical materials and statistical reporting data of the Central Bank of the Russian Federation, laws and regulations, domestic and foreign scientific literature, and analytical and reference online resources.

Fast growth and slow policy: a decade of digital credit in Kenya

Abstract The proliferation of mobile enabled instant credit products (digital credit) across emerging markets and developing economies poses challenges for policy-makers and practitioners that seek to expand access to credit while protecting consumers. The Kenya market, which experienced tremendous commercial innovation and growth from 2012 to 2022, but also significant consumer harms and unequal competition, offers a valuable reference case for actors in other markets facing rapid expansion of new fintech products and firms. Despite the substantial and often polarized debate around the country’s experience, there has been little systematic effort to capture and interpret key facts from the development of the digital credit market in Kenya during its first decade. This paper aims to fill that gap by providing a policy case study informed by original interviews of key stakeholders and extensive review of related academic and grey literature. The analysis suggests that policy responses were often inadequate to address the growing risks in Kenya’s digital credit market and presents five policy reflections from Kenya’s experience to support consumer protection and competition in emerging digital credit markets.

Endogenous property rights, credit market, and economic development

AbstractEmpirical evidence suggests that credit markets can catalyze property rights reforms. We illustrate this in a theoretical framework where a borrower must expend costly effort to protect output from predation. We consider two possible equilibrium loan contracts. In the first, lenders leave the decision to protect output to borrowers. In the second, lenders set the standard of property protection as a precondition for lending. The second contracting regime results in a higher level of property rights enforcement. Significantly, the level of economic development determines the equilibrium contracting form and vice versa. Based on this analysis, we jointly determine the evolution of property rights and economic development. The analysis also sheds light on the environments that lead an economy to a low development trap with a poor quality of property rights institutions.

Financing a Sustainable Future: The Role of Equity and Credit Market Development in Promoting Corporate Social Responsibility

Financing a Sustainable Future: The Role of Equity and Credit Market Development in Promoting Corporate Social Responsibility

Проблемы и перспективы развития кредитного рынка России

The article discusses the problems and prospects of the development of the Russian credit market. The author analyzes the main components of the Russian credit market, such as commercial loans for business, mortgage lending, car loans and consumer non-targeted loans. The state of the credit market depends on the state of the economy and the policy of the Central Bank. Possible measures to regulate debt collection activities and the formation of the institution of a public mediator of the financial system (financial ombudsman) are discussed.

The Impact of Credit Market Development on Auditor Choice: Evidence from Banking Deregulation

ABSTRACTWe exploit the staggered state‐level adoption of the Riegle‐Neal Interstate Banking and Branching Efficiency Act (IBBEA) to examine how banking deregulation and the resulting increase in bank competition affect firms’ auditor choices. We find that an exogenous increase in the degree of interstate branch banking deregulation leads to a reduction in firms’ propensity to engage a Big N or industry expert auditor. This main result, when combined with our cross‐sectional analyses, offers evidence suggesting that deregulation leads to less demand for higher quality auditors because (1) firms have increased access to credit, which reduces the benefits of higher audit quality; (2) entering banks’ lending expertise substitutes for higher quality financial statements; (3) incumbent banks with less lending expertise seek to protect their rents by preferring that borrowers provide lower quality financial statement information; and (4) external stakeholders delegate their monitoring to banks to a greater degree, resulting in less demand for higher quality financial statements. As such, our study sheds light on how the U.S. credit market's infrastructure shapes firms’ auditor choice decisions.

Analysis of nonperforming loans: case of Albania

The presence of a high level of nonperforming loans has been a growing concern in the world. This problem has been present in Albania, as well, which is one of the countries with the highest level of nonperforming loans in the region. Nonperforming loans hamper economic growth and constrain the monetary policy transmission mechanism.This paper examines the role of nonperforming loans in Albania by evaluating its level throughout the years and analyzing the ways in which these trends have shaped the credit market developments in Albania in terms of lending by economic sector and geographical position. This study strives to examine nonperforming loans as a result of other macroeconomic factors: GDP, remittances and inflation. The methodology involves time series analysis, which is used to identify the possible association between non-performing loans and macroeconomic variables. Multiple regression is used as a model to identify any relationship among them. The period covered is from 2014 to 2020, and it uses quarterly data. The paper uses secondary data, obtained from the Bank of Albania, United Nations database, UNECE, INSTAT, World Bank. The results show that nonperforming loans and these variables are correlated in the long-run.

APPLYING CONSUMER BEHAVIOR THEORY IN THE CREDIT MARKET OF BANKS IN VIETNAM

Modern marketing science says that in business, it is always necessary to satisfy the needs of consumers to get the desired profit. Decisions based on hypotheses about consumer behavior always have a higher probability of success than decisions based solely on managers' intuition. Within the scope of the article, based on the general perception of consumer behavior theory, analysis of the credit behavior of Vietnamese consumers, and the development of Vietnam's credit market, the author proposes some solutions to apply the theory of consumer behavior in credit business in Vietnam in the coming time.
 Keywords: Credit, Consumer Behavior, Vietnam.

Credit market development and agricultural production in selected African countries

This study aimed to examine the long and short-run relationships between credit market development and agricultural production using the Autoregressive Distributed Lags (ARDL) Bounds test for cointegration, as well as the direction of causality by using the Granger causality test. The results of the ARDL Bounds test revealed that institutional credit development had a significant long-run effect on agricultural production in all countries under examination, except for Tunisia; that is: Benin, Kenya, and Nigeria. In the short run, credit market development had a significant and positive effect on agricultural production in Nigeria. By contrast, the effect of credit market development on agricultural production was negative in the short-run in Benin, Kenya, and Tunisia. The result of granger causality test revealed the existence of significant bi-directional causal links between institutional credit development and agricultural production in Benin, Kenya and Nigeria, no significant interdependence was found between the two variables in Tunisia. Capital formation had a significant and positive effect on agricultural production in the long-run and short-run in all countries. Climate change was negatively associated with agricultural production in all countries except for Nigeria. The exchange rates and real interest rates had a negative effect on agricultural production in the long-run and short-run in all countries.

Innovation and credit market deepening: Evidence from Russian region

We investigate the impact of credit market deepening on innovation, considering the role of investment risk and investment potential in the context of Russian regions, analysing the panel time series data extracted from the Federal Statistics Department of the Russian Federation and using the method of moments quantile regression. Our baseline findings demonstrate that credit market development spurs innovation in the sample regions in all quantiles (q10–q90), and the credit market has a positive impact on innovation, regardless of whether investment risk is lower or higher. In addition, we reveal a U-shaped relationship between innovation and regional economic growth in Russian regions. We also observe reductions in imports and exports and a boosting effect of increased employment on innovation. We propose several potential policy measures and practical conclusions based on our findings.

Research on the Impact of Internet Consumer Credit Products on College Students' Consumption Behavior: Take Huabei as an Example

With the continuous development of science and technology, my country's Internet financial market is developing rapidly, and products have shown a trend of diversified innovation. The Internet consumer’s credit products on the market mainly include Huabei (Consumer’s Credit Pay of Ant Financial), JD Baitiao (Consumer’s Credit Pay in JD), VIPshop (Consumer’s Credit Pay in VIPS). Because these credit payments are personalized and convenient, they are loved by the majority of students. This article adopts a survey method for questionnaires, which uses Guangzhou university students as the research object to investigate and analyze the use of Huabei. Based on the results of questionnaires, it is found that some college students have the phenomenon of lack of advanced consumption and awareness when using Huabei. Although college students can alleviate short-term insufficient short -term insufficient short-term funding when using HUABEI, many borrowing platforms have not yet perfected standardized standardized management systems. There is still a place in the starting stage. In order to ensure the property security of college students, the platform should improve the construction of relevant laws and regulations, put forward suggestions on the target of the problems of college students, so that college students can establish healthy and reasonable consumption habits, and promote the development of the Internet consumer credit market.

Credit market development and corporate earnings management: Evidence from banking and branching deregulations

We investigate how external credit market development affects corporate earnings management, by studying the impact of the U.S. interstate banking and branching deregulations on the intensity of accruals-based and real earnings management. We find that the banking and branching deregulations significantly decrease both accruals-based and real earnings-management intensity among firms in deregulated states. The effect is stronger for those deregulated states that have lower bank branch density before deregulation and states that have greater out-of-state bank entry after deregulation. The impact on corporate earnings management is channelled through increased banking competition and credit supply providing firms with easier access to external financing. The findings are robust to various endogeneity concerns. We further document that interstate banking and branching deregulations reduce the instances of financial results being subsequently affected by accounting restatements and improve firms’ information environment.

Credit market developments and sectoral business cycles worldwide

Abstract This paper investigates the relationship between credits and sector-level output dynamics in a sample of 41 advanced and developing countries. The existing literature shows that household credits are associated with boom-bust cycles in aggregate output, whereas business loans do not cause such output dynamics. The present paper expands these findings in terms of advanced versus developing countries and manufacturing versus services sectors. The new findings indicate that the resulting boom-bust cycles in the aggregate output in response to household credits are generally observed in the sample of developing countries, with no similar dynamics in the advanced countries. Another significant conclusion is that the boom-bust cycles are generated mostly in the services sector. No equivalent boom-bust dynamics are observed in the manufacturing sector, but the negative medium-run effects of household credits are larger in this sector. These findings indicate that credit mechanisms and consequences can significantly vary across countries and sectors.

ІНСТИТУЦІЙНЕ ЗАБЕЗПЕЧЕННЯ ІННОВАЦІЙНОГО РОЗВИТКУ КРЕДИТНОГО РИНКУ

Institutional support for innovative development of the credit market is an important object of research, within the framework of which the search for effective methods, means and tools is carried out to improve the efficiency of its functioning. Analyzing the activities of the credit market, it can be noted that low efficiency of its work is largely determined by the imperfection of institutional support for the process of introducing innovative credit services.The purpose of the article is to study institutional support for innovative development of the credit market and determine their influence on the credit market development in Ukraine, which is necessary for understanding the interaction of credit market institutions, identifying factors that pro-mote or inhibit innovation and developing a strategy for creating a favorable innovation environment.Within the article, subjects of institutional support for innovative development of the credit market are studied. Considerable attention is paid to participants in the credit market in the field of innovative development, as well as to the regulatory legal acts that guide institutions in their methods of influence and regulation in the credit market, and functions of institutions are defined. Government institutions (the Na-tional Bank of Ukraine, Verkhovna Rada of Ukraine, Ministry of Finance of Ukraine, Ministry of Economy of Ukraine, National Securities and Stock Market Commission, Individual Deposit Guarantee Fund, Anti-monopoly Committee of Ukraine) were selected as subjects of institutional support for innovative develop-ment of the credit market. state institutions providing support for innovative activities (State Innovative Financial and Credit Institution), credit infrastructure institutions (banking and non-banking institutions, credit history bureaus, collection companies, rating agencies, credit brokers), fintech companies, educa-tional institutions (universities, scientific centers), innovative institutions (laboratories, technology parks, industrial parks, business incubators, technological hubs).The study of the influence of the above-mentioned subjects of institutional support for innovative development has become an important tool for understanding the interaction between government regulators of the credit market, credit institutions, educational institutions, innovative institutions, and fintech companies

The Impact of Credit Market Development on Corporate Profits Management: Empirical Analysis of Banking and Branching Deregulations

The Impact of Credit Market Development on Corporate Profits Management: Empirical Analysis of Banking and Branching Deregulations

Dynamic monitoring of green credit risk using a hybrid gray correlation degree-TOPSIS method.

Under the background of the new development pattern, the green credit market has ushered in a huge space for development. The monitoring and control of green credit risk is conducive to solving the negative impact of green credit risk and promoting the healthy development and smooth operation of the green credit market. This study first takes different provinces in China as samples; takes the data of government departments, financial institutions, enterprises, and other stakeholders as the monitoring content; and then uses the hybrid gray correlation degree-TOPSIS method to analyze. Next, this paper compares the green credit risk monitoring values of different regions at the same time and the same regions at different times. And it compares the green credit risk monitoring values of green finance pilot cities before and after the pilot. The research results show that there are obvious differences in eastern, central, and western regions in different time periods, and the green credit risk is also different in green finance pilot cities before and after the pilot. Stakeholders such as government departments, financial institutions, and enterprises need to take active measures to improve the efficiency of green credit risk management and achieve the sustainability of green credit development.

Does the impact of private education on growth differ at different levels of credit market development?

AbstractUsing an overlapping generations model, we show that the impact of private financing of education on growth depends on credit market development, being positive when credit markets are adequately developed but negative if sufficiently low levels of credit market development occur alongside relatively high private financing intensities. Employing cross‐country data, we find that reduced‐form growth relationships are statistically significant and robust under various controls and samples. We also lay out conditions under which economies with missing credit markets are dynamically efficient and outperform, in terms of growth, economies with complete credit markets. The latter may explain large cross‐country differences in savings and growth, while facilitating the evaluation of policies on financing education.