The effect of relationship banking on firm efficiency and default risk

Alev Yildirim

Journal of Corporate Finance, 2020, vol. 65, issue C

Abstract: Does relationship bank oversight reduce firm default risk and improve firm operational efficiency? I find that a new loan from a relationship bank reduces the default probability and increases the efficiency of a borrowing firm, benefiting both banks and borrowers. Moreover, inefficient and less creditworthy firms experience the highest reductions in their default risks and improvements in their efficiencies in the years following new relationship bank loans. Further, these benefits are disrupted when the relationship bank is acquired.

Keywords: Relationship banking; Firm efficiency; Default risk; Stochastic frontier analysis; Data envelopment analysis; Total factor productivity (search for similar items in EconPapers)
JEL-codes: G21 G30 G33 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (18)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:corfin:v:65:y:2020:i:c:s092911991830796x

DOI: 10.1016/j.jcorpfin.2019.101500

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