The Hold-up Problem and Banking Relationships: Evidence from the Polish SME Sector

Marcin Grzelak

Prague Economic Papers, 2019, vol. 2019, issue 6, 670-687

Abstract: This paper investigates how lender-borrower relationships affect credit cost for small and medium sized companies (SMEs). We use data within the period 2006-2015 for the Polish SME sector and deploy panel regression models to analyse how the number and length of banking relationships influence the financial costs of a random sample of Polish SMEs. We document that the price of capital decreases as relationships progress. Outcomes of the research are thus inconsistent with the "hold-up" hypothesis. Moreover, we find evidence that supports the view that multiple banking relationships generate more financial benefits for companies than a relationship with one lender.

Keywords: banking relationship; hold-up problem; information asymmetry; bank lending (search for similar items in EconPapers)
JEL-codes: D82 G21 G32 (search for similar items in EconPapers)
Date: 2019
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DOI: 10.18267/j.pep.727

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