Identification of Relationship Lending in Bank-Borrower Networks

Yoshitaka Ogisu, Shoka Hayaki and Masahiko Shibamoto
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Yoshitaka Ogisu: Faculty of Economics, Konan University and Junior Research Fellow, Research Institute for Economics and Business Administration, Kobe University, JAPAN

No DP2025-02, Discussion Paper Series from Research Institute for Economics & Business Administration, Kobe University

Abstract: Relationship lending refers to lending a close relationship between a bank and a borrower, which is expected to help reduce borrowing costs. However, the extent to which they are used is unclear. This measurement difficulty makes it challenging to evaluate its benefits accurately. This paper proposes a novel empirical framework to identify relationship lending in transaction data between banks and borrowers in a more objective manner by determining the set of significant ties from an ensemble of undirected and unweighted bipartite networks. Using the detected relationship lending between banks and borrowers, we estimate the magnitude of additional lending volumes based on relationship lending. From the financial data in Japan from 1977 to 2021, the usage of relationship lending is estimated to be over 50% throughout the sample period but has varied considerably over time. We find that the volume of relationship lending is 34% larger than that of transactional lending. Although the relative volume of relationship lending against transaction lending has been declining, the importance of relationship lending remains substantial in obtaining a larger volume of lending.

Keywords: Relationship lending; Bank-borrower networks; Significant ties (search for similar items in EconPapers)
JEL-codes: C81 G12 G21 L14 (search for similar items in EconPapers)
Pages: 17 pages
Date: 2025-02
New Economics Papers: this item is included in nep-fdg, nep-inv and nep-net
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