Economics at your fingertips  

Interorganizational trust and agency costs in credit relationships between savings banks and SMEs

Bernhard Hirsch, Christian Nitzl and Matthias Schoen

Journal of Banking & Finance, 2018, vol. 97, issue C, 37-50

Abstract: We analyze the impact of trust on agency costs in relationships between savings banks and SMEs as well as the mediating effects of hard information on interorganizational trust between these two actors. We tested six hypotheses using a structural equation model based on partial least squares. Study data were obtained from two German savings banks and dyadic questionnaires of relationship managers and credit risk officers. Our results provide evidence that interorganizational trust reduces agency costs by directly and indirectly increasing the quality of credit negotiations by lowering the bank's monitoring intensity via habitualization. Surprisingly, institutionalized trust increases the banks’ monitoring intensity.

Keywords: Trust; Agency costs; Debt finance; Bank-borrower-relationships; SME; Partial least squares path modeling (search for similar items in EconPapers)
JEL-codes: G21 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations Track citations by RSS feed

Downloads: (external link)
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:

Access Statistics for this article

Journal of Banking & Finance is currently edited by Ike Mathur

More articles in Journal of Banking & Finance from Elsevier
Bibliographic data for series maintained by Dana Niculescu ().

Page updated 2019-01-19
Handle: RePEc:eee:jbfina:v:97:y:2018:i:c:p:37-50