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Lasting lending relationships and technical efficiency. Evidence on European SMEs

Mariarosaria Agostino, Sabrina Ruberto and Francesco Trivieri ()
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Mariarosaria Agostino: University of Calabria
Sabrina Ruberto: University of Calabria
Francesco Trivieri: University of Calabria

Journal of Productivity Analysis, 2018, vol. 50, issue 1, 25-40

Abstract: Abstract Linking the theoretical predictions of the research on lending relationships with those of the literature on managerial incentives, we investigate whether the duration of credit relationships impacts on SMEs’ technical efficiency. Our hypothesis is that the balance between costs and benefits of enduring banking relationships might have heterogeneous effects on managers’ incentives depending on the level of firms’ indebtedness. Using a large sample of European SMEs, observed in the period 2001–2008, and adopting both parametric and non-parametric measures of efficiency, we find that the positive impact of longer lending relationships on efficiency decreases as indebtedness increases, suggesting that moral hazard problems may endanger firms’ technical efficiency.

Keywords: G20; G21; D24; L60; Enduring lending relationships; SMEs; Technical efficiency; DEA; SFA (search for similar items in EconPapers)
Date: 2018
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