Credit market concentration, relationship lending and the cost of debt

Stefano Bonini, Alberto Dell'Acqua, Matteo Fungo and Vlado Kysucky

International Review of Financial Analysis, 2016, vol. 45, issue C, 172-179

Abstract: We investigate how the banking industry concentration and the strength of credit relationships (relationship lending) jointly affect the cost of borrowing of firms. Our results indicate that relationship lending is not associated with the rent extraction mechanism deriving from informational lock-in. Conversely, market concentration appears to be associated with firms' higher cost of funding. But the effect is fully compensated if the relationship between the firm and the bank is long and comprehensive. Controlling for a number of covariates and for endogeneity concerns leaves results unchanged. Our results shed some new light on the unclear effects documented by Kysucky and Norden (2016) of relationship lending on the cost of financing.

Keywords: Relationship lending; Lending technologies; Credit market concentration; SME financing (search for similar items in EconPapers)
JEL-codes: G21 G30 G32 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1057521916300436
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:45:y:2016:i:c:p:172-179

DOI: 10.1016/j.irfa.2016.03.013

Access Statistics for this article

International Review of Financial Analysis is currently edited by B.M. Lucey

More articles in International Review of Financial Analysis from Elsevier
Bibliographic data for series maintained by Catherine Liu ().