When Arm?s Length Is Too Far. Relationship Banking over the Business Cycle

Hans Degryse, Ralph De Haas, Thorsten Beck and Neeltje Van Horen

No 10050, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: Using a novel way to identify relationship and transaction banks, we study how banks? lending techniques affect funding to SMEs over the business cycle. For 21 countries we link the lending techniques that banks use in the direct vicinity of firms to these firms? credit constraints at two contrasting points of the business cycle. We show that relationship lending alleviates credit constraints during a cyclical downturn but not during a boom period. The positive impact of relationship lending in an economic downturn is strongest for smaller and more opaque firms and in regions where the downturn is more severe.

Keywords: Relationship banking; Credit constraints; Business cycle (search for similar items in EconPapers)
JEL-codes: F36 G21 L26 O12 O16 (search for similar items in EconPapers)
Date: 2014-06
New Economics Papers: this item is included in nep-ban, nep-bec and nep-ent
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Citations: View citations in EconPapers (33)

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Related works:
Working Paper: When Arm's Length Is Too Far. Relationship Banking over the Business Cycle (2014)
Working Paper: When Arm’s Length is Too Far: Relationship Banking over the Business Cycle (2014)
Working Paper: When Arm’s Length is Too Far: Relationship Banking over the Business Cycle (2014)
Working Paper: When Arm’s Length is Too Far: Relationship Banking over the Business Cycle (2014)
Working Paper: When arm's length is too far. Relationship banking over the business cycle (2014)
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