RELATIONSHIP LENDING - EMPIRICAL EVIDENCE FOR GERMANY

Christoph Memmel, Christian Schmieder and Ingrid Stein ()

No 2008/1, Economic and Financial Reports from European Investment Bank, Economics Department

Abstract: Relationship lending is a common practice in credit financing all over the world, notably also in the European Union, which has been assumed to be particularly beneficial for Small and Medium-Sized Enterprises (SMEs). During recent years, there has been the impression that relationship lending loses ground due to a change of the banks' business models, which could ultimately yield to a worsening of the business environment for corporates and SMEs. In this study, we investigate the determinants of relationship lending for Germany, where relationship lending traditionally plays an important role. Compared to previous studies, we refer to much more comprehensive data with information on more than 16,000 firm-bank relationships. Our findings confirm the assumption that relationship lending seems to be an important pillar for economic growth and employment: We find that the firms that are most likely to contribute to (future) economic growth, namely small and R&D-intensive firms, tend to choose a relationship lender. The same is observed for firms of high credit quality, independent of their size or R&D intensity. Furthermore, we also observe that the importance of relationship lending did not decrease since the mid 1990s.

Keywords: Relationship banking; German banking system; SME (search for similar items in EconPapers)
JEL-codes: G21 G32 (search for similar items in EconPapers)
Pages: 34 pages
Date: 2008-05-20
New Economics Papers: this item is included in nep-ban, nep-bec, nep-cfn, nep-eec and nep-ent
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

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Related works:
Working Paper: Relationship lending: empirical evidence for Germany (2007)
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