Relationship Banking and Firm Profitability

Shigeru Uchida and Sarwar Ahmed
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Shigeru Uchida: Faculty of Economics Nagasaki University, Japan

Chapter 4 in Studies on Financial Markets in East Asia, 2011, pp 61-73 from World Scientific Publishing Co. Pte. Ltd.

Abstract: AbstractSmall and medium enterprises (SMEs) having less creditworthiness and reputation compared to bigger firms are in greater need of establishing long-term relationship with banks to ensure continued supply of funds. Accordingly, this study aims at summarizing the findings of the empirical analysis regarding the impact of relationship banking on the performance of SMEs of Japan. The findings of the analysis indicated that, having multiple banking relationships implies rather weak profitability status of a corporate firm. Although relationship banking leading towards corporate shareholding raises profitability of the SMEs, increased supply of credit conversely reduces the profits. But overall, relationship banking has positive impact on the profitability of SMEs while there are other reasons to explain the negative relationship between credit and profitability.

Keywords: Financial Market; Foreign Exchange Rate; Sub-prime Crisis; Real Estate Market; Relationship Banking; Dividend and Share; Stock Market; Government Bond; Hedging; IPO; Return; Volatility; Liquidity; Risk Attitude; Investment Behavior; Fund Managers (search for similar items in EconPapers)
Date: 2011
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