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Relationship and Transaction Lending in a Crisis

Patrick Bolton, Xavier Freixas (), Leonardo Gambacorta () and Paolo Emilio Mistrulli ()

No 714, Working Papers from Barcelona Graduate School of Economics

Abstract: We study how relationship lending and transaction lending vary over the business cycle. We develop a model in which relationship-banks gather information on their borrowers, which allows them to provide loans to profitable firms during a crisis. Due to the services they provide, operating costs of relationship-banks are higher than those of transaction-banks. Relationship-banks charge a higher intermediation spread in normal times, but offer continuation-lending at more favourable terms than transaction banks to profitable firms in a crisis. Using credit register information for Italian banks before and after the Lehman Brothers' default, we test the theoretical predictions of the model.

Keywords: relationship banking; transaction banking; crisis (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: 2016-02
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http://www.barcelonagse.eu/sites/default/files/working_paper_pdfs/714.pdf (application/pdf)

Related works:
Journal Article: Relationship and Transaction Lending in a Crisis (2016) Downloads
Working Paper: Relationship and transaction lending in a crisis (2013) Downloads
Working Paper: Relationship and Transaction Lending in a Crisis (2013) Downloads
Working Paper: Relationship and Transaction Lending in a Crisis (2013) Downloads
Working Paper: Relationship and Transaction Lending in a Crisis (2013) Downloads
Working Paper: Relationship and transaction lending in a crisis (2013) Downloads
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