Disrupted lending relationship and borrower's strategic default: evidence from the tourism industry during the Greek economic crisis

Panagiotis Avramidis, Ioannis Asimakopoulos and Dimitrios Malliaropulos
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Panagiotis Avramidis: Alba Graduate Business School, The American College of Greece

No 285, Working Papers from Bank of Greece

Abstract: Using a sample of bank loans to firms operating in the tourism industry for the period 2010-2015, and regional variation of tourism activities to identify the strategic defaulted firms, we examine the impact of Greek banks consolidation on the firms’ payment behavior. We show that a merger-induced impairment of the lending relationship is related to a higher likelihood of strategic default by the target bank’s borrowers. In contrast, mergers with a limited impact on the lending relationship have no effect on the probability of strategic default of target bank’s borrowers. The results highlight the importance of relationship lending benefits in strategic default decisions. Our findings are robust to the alternative interpretation of soft budget constraints.

Keywords: Bank consolidation; strategic default; lending relationship. (search for similar items in EconPapers)
JEL-codes: G21 G32 G33 (search for similar items in EconPapers)
Pages: 40
Date: 2021-01
New Economics Papers: this item is included in nep-ban, nep-cfn and nep-tur
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