Lending relationships and the collateral channel

Gareth Anderson (), Saleem Bahaj, Matthieu Chavaz, Angus Foulis and Gabor Pinter
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Gareth Anderson: Oxford University

No 768, Bank of England working papers from Bank of England

Abstract: This paper shows that lending relationships insulate corporate investment from fluctuations in collateral values. We construct a novel database covering the banking relationships of private and public UK firms and their individual directors. The sensitivity of corporate investment to changes in real estate collateral values is halved when the relationship between a bank and a firm or its board of directors increases by 11 years. The importance of long bank-firm relationships diminishes when directors have personal mortgage relationships with their firm’s lender. Our findings support theories where collateral and private information are substitutes in mitigating credit frictions over the cycle.

Keywords: Collateral; lending relationships; SMEs; information frictions (search for similar items in EconPapers)
JEL-codes: E22 E32 G32 (search for similar items in EconPapers)
Pages: 50 pages
Date: 2018-11-16
New Economics Papers: this item is included in nep-ban, nep-bec, nep-cfn and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Related works:
Journal Article: Lending Relationships and the Collateral Channel* (2023)
Working Paper: Lending Relationships and the Collateral Channel (2018)
Working Paper: Lending relationships and the collateral channel (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:boe:boeewp:0768

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