Bank-firm Relationships: A Review of the Implications for Firms and Banks in Normal and Crisis Times

Hans Degryse, Vasso Ioannidou () and Steven Ongena
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Vasso Ioannidou: Lancaster University

Chapter 9 in The Economics of Interfirm Networks, 2015, pp 177-189 from Springer

Abstract: Abstract Banks are important providers of external finance to firms. In order to solve asymmetric information problems, firms and banks often engage in bank-firm relationships. Relationship banking occurs when a bank and a borrower enter multiple mutual interactions and both parties invest in obtaining some counterparty specific information, binding bank and firm, to a certain degree, to each other. This chapter starts with a discussion of reasons for having exclusive versus non-exclusive relationships. It provides a concise overview on the determinants of the number and intensity of bank-firm relationships, and reviews how relationship banking generates costs and benefits for both banks and firms. We show that on average bank-firm relationships generate value for both. The costs and benefits of bank-firm relationships, however, vary substantially with whether an economy is in normal or crisis times.

Keywords: Relationship banking; Non-exclusivity; Financial crisis (search for similar items in EconPapers)
Date: 2015
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DOI: 10.1007/978-4-431-55390-8_9

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