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The real effects of relationship lending

Ryan Banerjee, Enrico Sette and Leonardo Gambacorta ()

No 1133, Temi di discussione (Economic working papers) from Bank of Italy, Economic Research and International Relations Area

Abstract: This paper studies the real consequences of relationship lending on firm activity in Italy following Lehman Brothers’ default shock and Europe’s sovereign debt crisis. We use a large data set that merges the comprehensive Italian Credit and Firm Registers. We find that following Lehman’s default, banks offered more favourable continuation lending terms to firms with which they had stronger relationships. Such favourable conditions enabled firms to maintain higher levels of investment and employment. The insulation effects of tighter bank-firm relationships was still present during the European sovereign debt crisis, especially for firms tied to well capitalised banks.

Keywords: relationship banking; real effects of credit; credit supply (search for similar items in EconPapers)
JEL-codes: E44 G21 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ban and nep-mac
Date: 2017-09
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