Does face-to-face contact matter? Evidence on loan pricing

Giampaolo Gabbi, Michele Giammarino, Massimo Matthias, Stefano Monferrà and Gabriele Sampagnaro

The European Journal of Finance, 2020, vol. 26, issue 7-8, 820-836

Abstract: This paper focuses on the economic impact of the lender–borrower relationship on loan interest rates and tests whether repeated bank-firm contact significantly reduces these rates. We find strong evidence of the ‘relationship intensity’ hypothesis, and we detect a contribution of physical contact between banks and firms to loan pricing, controlling for the location where contact occurs. Finally, we report new evidence on the hold-up problem; in particular, we find that under certain circumstances, a closer relationship may alleviate extra borrowing costs.

Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:taf:eurjfi:v:26:y:2020:i:7-8:p:820-836

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DOI: 10.1080/1351847X.2019.1703023

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