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The effect of relationship banking on firm efficiency and default risk

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  • Yildirim, Alev

Abstract

Does relationship bank oversight reduce firm default risk and improve firm operational efficiency? I find that a new loan from a relationship bank reduces the default probability and increases the efficiency of a borrowing firm, benefiting both banks and borrowers. Moreover, inefficient and less creditworthy firms experience the highest reductions in their default risks and improvements in their efficiencies in the years following new relationship bank loans. Further, these benefits are disrupted when the relationship bank is acquired.

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  • Yildirim, Alev, 2020. "The effect of relationship banking on firm efficiency and default risk," Journal of Corporate Finance, Elsevier, vol. 65(C).
    • Handle: RePEc:eee:corfin:v:65:y:2020:i:c:s092911991830796x
    DOI: 10.1016/j.jcorpfin.2019.101500
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    More about this item

    Keywords

    Relationship banking; Firm efficiency; Default risk; Stochastic frontier analysis; Data envelopment analysis; Total factor productivity;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation

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