Does relationship lending matter in an emerging market?

Naël Shehadeh, Faicel Belaid, Gilles Dufrénot and Christelle Lecourt
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Naël Shehadeh: AMU - Aix Marseille Université, CNRS - Centre National de la Recherche Scientifique
Faicel Belaid: AMSE - Aix-Marseille Sciences Economiques - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique, AMU - Aix Marseille Université
Gilles Dufrénot: AMSE - Aix-Marseille Sciences Economiques - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique, AMU - Aix Marseille Université
Christelle Lecourt: AMSE - Aix-Marseille Sciences Economiques - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique, AMU - Aix Marseille Université

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Abstract: Based on a unique database (data on 2529 bank-firm relationships of 403 firms from 2012 to 2018) provided by the Central Bank of Tunisia, this article analyses the impact of the intensity and duration of bank-firm relationship on loan quality. By estimating a panel ordered probit model, the results show that the intensity of the lending relationship has a positive (negative) impact on high (medium or low) quality loans. In addition, the duration of the bank-firm relationship increases the probability of low-quality loans. We also find that the impact of relationship lending on loan quality differs according to the level of profitability of the firm. Low and non-performing firms tend to have longer and closer bank relationship, whereas it is the opposite for performing firms. Our results suggest that in an emerging market concentrated around a few banks, longer and closer banking relationships are mainly in favour of low and non-performing firms, reflecting adverse selection and strong moral hazard.

Keywords: Banks; Relationship lending; credit registry; Tunisia (search for similar items in EconPapers)
Date: 2023-10-16
Note: View the original document on HAL open archive server: https://hal.science/hal-04608287v1
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Published in Applied Economics, 2023, 56 (50), pp.1-17. ⟨10.1080/00036846.2023.2269629⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-04608287

DOI: 10.1080/00036846.2023.2269629

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