Expected Losses, Unexpected Costs? Evidence from SME Credit Access under IFRS 9

Ertan, A (2025) Expected Losses, Unexpected Costs? Evidence from SME Credit Access under IFRS 9. Accounting Review, 100 (4). pp. 443-473. ISSN 0001-4826 OPEN ACCESS

Abstract

This paper examines lending effects of European banks switching to an expected credit loss (ECL) model under IFRS 9. I find evidence that ECL transition deteriorates the credit landscape for SMEs—as risky, opaque, and bank-dependent borrowers. Post-ECL, affected banks reduced SME lending by over 10 percent, and these effects persisted during the most recent downturn during the COVID-19 pandemic. Banks’ financial reporting objectives and implementation difficulties seem to explain these findings. Additional tests at the borrower and loan-contract levels indicate rising loan rejection rates, interest spreads, and collateral requirements, as well as declining loan amounts, maturities, and subsequent capital investments, for SMEs that do business with affected banks.

More Details

Item Type: Article
Subject Areas: Accounting
Date Deposited: 28 May 2025 12:09
Date of first compliant deposit: 30 May 2025
Last Modified: 25 Jul 2025 09:25
URI: https://lbsresearch.london.edu/id/eprint/4101
More

Export and Share


Download

Accepted Version - Text

Statistics

Altmetrics
View details on Dimensions' website
Cited 0 times in

Downloads from LBS Research Online

View details

Actions (login required)

Edit Item Edit Item