Number of bank relationships: An indicator of competition, borrower quality, or just size?

Achim Machauer and Martin Weber

No 2000/06, CFS Working Paper Series from Center for Financial Studies (CFS)

Abstract: In this study the firms' choice of the number of bank relationships is analyzed with respect to influential factors like borrower quality, size and the existence of a close housebank relationship. Then, the number of bank relationships is used as a proxy to examine if bank competition is reflected in loan terms. It is shown that the number of bank relationships is foremost determined by borrower size and the existence of a housebank relationship. Loan rate spreads are not effected by the number of bank relationships. However, borrowers with a small number of bank relationships provide more collateral and get more credit. These effects are amplified by a housebank relationship. Housebanks get more collateral and are ready to take a larger stake in the financing of their customers.

Keywords: Relationship banking; Bank loan terms; Internal borrower rating (search for similar items in EconPapers)
JEL-codes: G21 (search for similar items in EconPapers)
Date: 2000
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Citations: View citations in EconPapers (50)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:cfswop:200006

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