Bank relationships: effect on the availability and marginal cost of credit for firms in Argentina

Jorge Streb (), Javier Bolzico, Pablo Druck, Alejandro Henke, José Rutman and Walter Sosa Escudero ()

No 216, CEMA Working Papers: Serie Documentos de Trabajo. from Universidad del CEMA

Abstract: The paper provides evidence on what affects at the margin the cost and availability of bank credit for firms in Argentina. We study in particular how banks use different pieces of private and public information to screen firms and overcome informational asymmetries in the credit market. Some private information is transferable, like balance sheet data. Private information generated in relationships is not. To capture the closeness of bank relationships, we resort to the concentration of bank credit and the number of credit lines in a bank. We also consider public information available in the Central de Deudores. The cost of credit is measured using overdrafts, the most expensive line of credit, at the bank that charges the highest rate for overdrafts. We find that the cost of credit is smaller for a firm with a close relationship to the marginal bank. Firms with large assets, a high sales/assets ratio, and a low debt/assets ratio pay a lower interest rate at the margin. A good credit history (no debt arrears and no bounced checks) and collateral also reduce the marginal interest rate. The availability of credit is measured by unused credit lines as a proportion of total liabilities with the main bank. The availability of credit depends positively on a close relationship with the main bank. Large assets, a high return over assets, a high sales/assets ratio, a low debt/assets ratio, a good credit history, and collateral lead to higher credit availability. Our measure of unused credit lines is less ambiguous than traditional measures like leverage, which may indicate financial distress rather than availability of credit.

JEL-codes: D82 E44 G14 G20 (search for similar items in EconPapers)
Pages: pages
Date: 2002-05
New Economics Papers: this item is included in nep-ent
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (11)

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https://www.ucema.edu.ar/publicaciones/download/documentos/216.pdf (application/pdf)

Related works:
Working Paper: Bank Relationships: Effect on the Availability and Marginal Cost of Credit for Firms in Argentina (2002)
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Persistent link: https://EconPapers.repec.org/RePEc:cem:doctra:216

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