Comment on Peek and Rosengrew and Strahan and Westow

Article Abstract:

The studies conducted by Peek and Rosengrew (PR); and Strahan and Westow (SW) provide significant overview on the importance of banks to small business lending. Although both researches provide an extensive analysis on the issue, a number of points are worth refuting. SW's work is merely confined on organizational diseconomies, failing to evaluate the long-term impact of bank consolidation to small business lending. PR's work, on the other hand, was not able to generate a significant correlation between total assets and lending capabilities since banks have been incorrectly classified.

Research

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Small business lending and the changing structure of the banking industry

Article Abstract:

The lending capacity of financial institutions, particularly to small business organizations, has been found to be influenced by the size and degree of complexity of banks. It was noted that as the total asset of subsidiaries increase, small business lending tends to rise likewise. The ability of banks to provide loans to small businesses has also been shown to create a direct relationship with company size and diversity. However, it was stressed that such results are only prevalent in small business lending activities where mergers and acquisitions are involved.

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On the profitability and cost of relationship lending

Article Abstract:

Loan rate smoothing in response to interest rate shock is found to be part of an optimal long term contract between borrower and lender in general. The study seeks to determine the effects on smoothing on bank costs and profits and also finds that loan rate smoothing as a response to credit risk shock is not part of the lender and the borrower's optimal long term contract in general.

Bank management, Bank loans

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