Even though it is generally recognised that new firms encounter difficulty in obtaining loans from banks, little research is devoted to the factors which influence bank lending between 2004 and 2007. More precisely, this study attempts to fill a gap in the research of bank lending practices and behaviour of bank loan officers.
This research study contributes to the body of literature in the field of lending between banks and SMEs. More specifically, the study compares the lending practices between British and German retail banks.
A qualitative approach was employed as a research design because the study related to lending practice and risk within the context of a social setting.
It is worth mentioning that whilst the empirical findings in this study predated the credit crunch, the areas discussed was about how banks managed risk and the ambiguous nature of external pressures affecting their lending practices both in the UK and Germany.
There is no doubt that after the biggest banking crisis in history, academic researchers and regulatory institutions will inevitably ask questions about how banks behaved during this period. The upshot of recent academic research is compelling and suggests that the regulatory institutions and politicians knew little about the activities of banks particularly in the UK.
The findings in this research also reveal that whilst German banks steer towards the Anglo Saxon banking model (shareholder approach); they struggle to shake off their embedded culture and values, oriented towards the goodness of communities (stakeholder approach).
The findings also show that British retail banks continue to lend by distance and SMEs continue to believe that banks in Britain orientate their strategies towards large multinational firms.
A Doctoral Thesis. Submitted in partial fulfilment of the requirements for the award of Doctor of Philosophy of Loughborough University.