Social ties between SME managers and bank employees: Financial consequences vs. SME managers' perceptions

We investigate whether social ties between SME managers and bank employees affect SME access to lending, investment, growth and profitability. On the one hand, we examine the influence of social ties on financial indicators based on SME financial statements; on the other hand, we study the impact of...

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Bibliographic Details
Published in:Emerging markets review 2019-09, Vol.40, p.100619, Article 100619
Main Authors: Jackowicz, Krzysztof, Kozłowski, Łukasz
Format: Article
Language:English
Subjects:
Managerial perceptions
SME financing
SME performance
Social ties
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Summary:We investigate whether social ties between SME managers and bank employees affect SME access to lending, investment, growth and profitability. On the one hand, we examine the influence of social ties on financial indicators based on SME financial statements; on the other hand, we study the impact of social ties on SME managers' perceptions of their firms' main banks. Using a dataset from Poland, we find that social ties improve SMEs' access to bank financing and stimulate their investments. However, this positive impact occurs only when social ties involve bank decision-makers. In contrast, SME managers perceive all types of social ties with bank workers as valuable. •We examine the economic role of social ties between SMEs and banks.•We also determine how social ties affect SME managers' opinions about banks.•Social ties improve an SME's access to financing and stimulate investment.•Social ties matter only when they involve bank-decision makers.•In contrast, SME managers perceive all types of social ties as valuable.
ISSN:1566-0141
1873-6173
DOI:10.1016/j.ememar.2019.05.004