Essays on SME finance and banking.

Summary In an economic environment still weakened by the Great Recession, SMEs appear to be a key driver of activity and employment. In this thesis, I examine the determinants and consequences of SMEs' financial constraints afin order to identify the forms of bank financing best suited to their situations. The first chapter analyzes the effects of banking business models on SME financing and shows that trading banks increase short-term credit constraints as well as financing costs. More importantly, the negative externality of trading on the availability of short-term credit is even stronger for highly capitalized banks that are dependent on derivatives. The second chapter focuses on the beneficial effet of the banking relationship for SMEs. We show that relationship lenders charge higher rates during growth periods and lower rates during crisis periods. However, by including single-banked firms in our analysis, we find that this insurance mechanism depends on firms' ability to diversify their borrowing from multiple banks. Infin, the third chapter focuses on the actual effects of financial constraints. My results highlight the crucial importance of short-term financing for SME investment through the working capital channel. Firms that have investment opportunities cannot seize them because cash credit constraints force them to allocate more cash flow to financing working capital.