Bank-firm relationship and credit risk: An analysis on Tunisian firms

Faiçal Belaid, Rim Boussaada and Houda Belguith

Research in International Business and Finance, 2017, vol. 42, issue C, 532-543

Abstract: This paper analyses the impact of the intensity and length of bank-firm lending relationship on Tunisian banks’ credit risk over the period 2001–2012. The sample includes 494 bank-firm relationships for 383 firms. By applying probit and ordered probit models, our results indicate that firms which engage in intense relationships with banks are less likely to encounter a credit default. In addition, these firms exhibit a higher loan quality. However, no evidence has been found for the impact of the relationship length on credit risk. Further, the findings show that private banks, unlike public financial institutions, take advantage of their close lending relationships with borrowers to mitigate information asymmetry and therefore improve their loans portfolio quality.

Keywords: Bank-firm lending relationship; Credit risk; Tunisian banks; Probit; Ordered probit (search for similar items in EconPapers)
JEL-codes: G21 G30 G32 G33 (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:riibaf:v:42:y:2017:i:c:p:532-543

DOI: 10.1016/j.ribaf.2017.04.011

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