How do changes in financial reporting standards affect relationship lending?

Daniel Dejuan-Bitria, Wayne R. Landsman, Sergio Mayordomo and Irene Roibás
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Wayne R. Landsman: BANCO DE ESPAÑA
Irene Roibás: BANCO DE ESPAÑA

No 2437, Working Papers from Banco de España

Abstract: This paper analyses the effect of the expected credit loss model under IFRS 9 on relationship lending in Spain. We document that relationship exclusivity between a bank and a firm has a positive effect on the growth of credit. However, this positive effect is significantly reduced after implementation of IFRS 9. We estimate that in 2018 the negative impact of IFRS 9 on relationship lending led to a reduction in credit to Spanish non-financial firms of 2.8% of their total outstanding credit, suggesting a sizeable effect on the availability of credit. For borrowers with Stage 1 loans, we show that the new regulation has a negative impact on relationship lending at firms with a higher probability of default and whose credit quality has deteriorated. Our findings are consistent with a change in the incentives that underpin relationship lending.

Keywords: relationship lending; IFRS 9; credit; probability of default (search for similar items in EconPapers)
JEL-codes: D82 G21 G28 (search for similar items in EconPapers)
Pages: 51 pages
Date: 2024-10
New Economics Papers: this item is included in nep-acc, nep-ban, nep-cfn and nep-fdg
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Persistent link: https://EconPapers.repec.org/RePEc:bde:wpaper:2437

DOI: 10.53479/37892

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