When Arm's Length Is Too Far. Relationship Banking over the Business Cycle

Thorsten Beck, Hans Degryse, Ralph De Haas and Neeltje Van Horen (neeltje.vanhoren@bankofengland.co.uk)

No 4877, CESifo Working Paper Series from CESifo

Abstract: Using a novel way to identify relationship and transaction banks, we study how banks’ lending techniques affect funding to SMEs over the business cycle. For 21 countries we link the lending techniques that banks use in the direct vicinity of firms to these firms’ credit constraints at two contrasting points of the business cycle. We show that relationship lending alleviates credit constraints during a cyclical downturn but not during a boom period. The positive impact of relationship lending in an economic downturn is strongest for smaller and more opaque firms and in regions where the downturn is more severe.

Keywords: relationship banking; credit constraints; business cycle (search for similar items in EconPapers)
JEL-codes: F36 G21 L26 O12 O16 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (33)

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Related works:
Working Paper: When Arm?s Length Is Too Far. Relationship Banking over the Business Cycle (2014)
Working Paper: When Arm’s Length is Too Far: Relationship Banking over the Business Cycle (2014)
Working Paper: When Arm’s Length is Too Far: Relationship Banking over the Business Cycle (2014)
Working Paper: When Arm’s Length is Too Far: Relationship Banking over the Business Cycle (2014)
Working Paper: When arm's length is too far. Relationship banking over the business cycle (2014)
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