Relationship and Transaction Lending in a Crisis

Patrick Bolton, Xavier Freixas, Leonardo Gambacorta and Paolo Emilio Mistrulli ()

Review of Financial Studies, 2016, vol. 29, issue 10, 2643-2676

Abstract: We study how relationship lending and transaction lending vary over the business cycle. We develop a model in which relationship banks gather information on their borrowers, allowing them to provide loans to profitable firms during a crisis. Because of the services they provide, operating costs of relationship banks are higher than those of transaction banks. Relationship banks charge a higher intermediation spread in normal times, but offer continuation lending at more favourable terms than transaction banks to profitable firms in a crisis. Using credit register information for Italian banks before and after the Lehman Brothers’ default, we test the theoretical predictions of the model.Received July 29, 2014; accepted February 20, 2016 by Editor Philip Strahan.

Date: 2016
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Related works:
Working Paper: Relationship and Transaction Lending in a Crisis (2016)
Working Paper: Relationship and transaction lending in a crisis (2013)
Working Paper: Relationship and Transaction Lending in a Crisis (2013)
Working Paper: Relationship and Transaction Lending in a Crisis (2013)
Working Paper: Relationship and Transaction Lending in a Crisis (2013)
Working Paper: Relationship and transaction lending in a crisis (2013)
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