The Impact of Durable Relationship with Banks when Crisis Hits

Tamer Bakiciol

Emerging Markets Finance and Trade, 2017, vol. 53, issue 11, 2609-2624

Abstract: Firms develop relationships with their banks in order to ensure access to financing when credit conditions deteriorate in time of crisis. I investigate the effect of bank-firm relationships in Turkey where 90 percent of a firm’s financial debt is obtained through bank loans. I find that adjusted for loan terms and firm-fixed effects, borrowers with past relationships with incumbent banks have lower risk-adjusted financing costs. Furthermore, lower financing costs associated with relationship are even more pronounced during the 2008–2009 financial crisis.

Date: 2017
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DOI: 10.1080/1540496X.2017.1326027

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