Relationship lending and SMEs’ funding costs over the cycle: Why diversification of borrowing matters

Mikael Beatriz, Jerome Coffinet and Théo Nicolas

Journal of Banking & Finance, 2022, vol. 138, issue C

Abstract: Using a unique panel design that enables to control for bank, firm, market and loan heterogeneities, we confirm that relationship lenders charge higher rates in good times and lower rates in bad times. However, we show that risky single-bank firms do not benefit from this insurance mechanism and are “held-up” by relationship lenders. Local bank competition and higher non-bank finance dependence alleviate this information-monopolistic behavior. Finally, long-term loans and small, non-trading-oriented and well-capitalized banks drive the benefits of relationship lending.

Keywords: Relationship lending; Financial crisis; Interest rates; Bank lending channel; SME; Competition (search for similar items in EconPapers)
JEL-codes: D82 E32 E51 G01 G21 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Working Paper: Relationship lending and SMEs funding costs over the cycle: why diversification of borrowing matters (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:138:y:2022:i:c:s0378426618302760

DOI: 10.1016/j.jbankfin.2018.12.007

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