The effect of Basel II on SME financing in Germany. An exploratory study of the impact of the new Basel Accord on SMES and financiers in Germany

摘要

The New Capital Accord (henceforth, Basel II), is expected to imposeuddramatic changes on banks and other providers of corporate financing, asudwell as companies. Literature indicates that small and medium sizedudenterprises (henceforth SMEs), in general, and in particular German SMEsudseem to be affected: Germany has the highest SME density with SMEsudcomprising 99.6% of all corporations (IMF, 2008), these SMEs are highlyuddependent on banks for financing (see Jacobson et al, 2006). However, thereudis huge controversy in the literature concerning how these changes will look,udright before Basel II came into effect in the years 2007 / 2008 in theudEuropean Union. In order to explore this effect from a Post-Basel IIudperspective, the objective of this research project is to establish what effectudBasel II will have on corporate financing of SMEs in Germany.udThe high impact on SMEs (in Germany), combined with controversialudevidence from extant Pre-Basel II research, indicates a high relevance toudacademics and practitioners for this thesis. This thesis is probably the firstudfrom a Post-Basel II perspective which covers both the SMEs' as well asudthe financiers' perspective.udBased on a structured literature review using the comparative methodud(Peters, 1998) 'Most Different Systems' evidence is provided that there is noudconsistent picture regarding the effect of Basel II. Therefore, further researchudis needed to determine whether the effect in Germany is consistent, from audPost-Basel II perspective, with regards to the conditions which trigger certainudmechanisms, from a 'scientific realism' (Smith, 1998) perspective, becauseudthe literature indicates that 'positivist generalising' has limited validity.udBuilding on Creswell (2003), an 'exploratory sequential' design was createdudto 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'sudphilosophical stance of 'scientific realism' by means of triangulation (Robson,ud2002:174). The result of the initial quantitative phase is based on the analysisudof questionnaire data from 125 SMEs and financiers (banks, private equityudcompanies, family offices, providers of alternative means of financing) derivedudfrom a probabilistic sample frame in the fourth quarter of 2008. Mathematicaludmodels for SMEs and financiers regarding the three initial hypothesesudwere set-up and tested using the appropriate statistical tests. In order to limitudbias by means of a spill-over effect from the financial crises, controludquestions were used. The subsequent qualitative phase by means of semistructuredudelite interviews (Saunders et al, 2007:312) between March andudMay 2009 enabled a valid triangulation and provided in-depth insights intoudhow SMEs can cope best with Basel II. The purposive sample, of 17 'importantudcases', included company owners and top-level financier executives.udIn a conclusive quantitative and qualitative synopsis, the three initialudhypotheses were acknowledged. However, the qualitative in-depth analysisudby means of 'causal networks' (Miles and Huberman, 1994) led to anudamendment of the hypotheses as follows:ud1. Corporate finance has become different for SMEs because the 'houseudbank principle' has changed to a 'core bank principle' due to Basel II.udShopping around regarding credits will be more difficult which makesudfinancing more difficult. This could be overcompensated by major SMEs,udby using non-credit corporate financing which leads to a reduction of theud'house bank' principle.ud2. SMEs can cope best with the effect when they:uda) proactively engage in rating and improve the parameters, orudb) they adjust their strategy as stated in hypothesis 3.ud3. Financiers (especially non-bank financiers) will engage in SME corporateudfinance when they have a sound financial basis / management and whenudthey adjust their strategy in terms of growth with the aim of niche marketudleadership and when they open up for exit strategies.