ZEW policy brief Published: Start-up Financing: How Credit Ratings and Bank Concentration Impact Credit Access

The Basel II Accord implemented a tighter regulation of the banking sector. The importance of external credit scoring conducted by rating agencies has thus grown significantly for banks providing business loans. Especially innovative, not yet established companies without a convincing credit history often face substantial difficulties accessing credit. There is no evidence, however, that this is due to unfavourable or missing ratings. A study conducted by the Centre for European Economic Research (ZEW) in cooperation with the University of St. Gallen, Tilburg University and KU Leuven within the framework of the SEEK Research Programme shows that negative ratings are barriers to companies’ access to credit. Young innovative firms, however, are significantly less impacted by this effect.