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Bank relationship loss: The moderating effect of information opacity

Yuqian Xu, Anthony Saunders, Binqing Xiao and Xindan Li

Journal of Banking & Finance, 2020, vol. 118, issue C

Abstract: We examine the impact on a firm when it is forced to switch its bank relationship from one branch to another branch of the same bank, and how the firm’s information opacity (as proxied by the frequency with which the firm provides financial statements to the bank) moderates the consequences of relationship loss. We find the effect depends on the relative balance between the hard accounting information provided to the bank and the soft information about the firm due to its prior branch relationship. We show the loss of soft information provided to loan officers at the new branch, as a result of the forced branch switch, has a significant effect on the cost, maturity, and availability of loans from the new branch. Furthermore, we document the moderating effect of accounting information opacity on loan conditions upon relationship loss.

Keywords: Bank relationship; Accounting information; Opacity; Credit access; Loan cost (search for similar items in EconPapers)
JEL-codes: G15 G20 G21 G30 M41 (search for similar items in EconPapers)
Date: 2020
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DOI: 10.1016/j.jbankfin.2020.105872

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