Bank–firm relations and the role of Mutual Guarantee Institutions at the peak of the crisis
AbstractWe examine the role played by Mutual Guarantee Institutions (MGIs) in the lending policies undertaken by banks at the peak of the Great Crisis of 2007–2009. We address this issue by using a large database on Italian firms built from the credit files of UniCredit banking Group and focusing on small business. We provide an empirical analysis of the determinants of the probability that a borrowing firm will suffer financial tension and obtain two main innovative findings. First, we find that small firms supported by MGIs less likely experienced financial tensions even at that time of utmost financial stress. Second, our empirical evidence shows that MGIs played a signaling role beyond the simple provision of collateral. This latter finding suggests that the information provided by MGIs turned out to be key for bank–firm relations as scoring and rating systems – being typically based on pro-cyclical indicators – had become less informative during the crisis.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Financial Stability.
Volume (Year): 9 (2013)
Issue (Month): 1 ()
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Web page: http://www.elsevier.com/locate/jfstabil
Financial crisis; Bank–firm relationships; Asymmetric information; Credit guarantee schemes; Small business finance; Peer monitoring;
Other versions of this item:
- Francesca Bartoli & Giovanni Ferri & Pierluigi Murro & Zeno Rotondi, 2011. "Bank-firm relations and the role of Mutual Guarantee Institutions during the crisis," series 0034, Dipartimento di Scienze Economiche e Metodi Matematici - Università di Bari, revised Jan 2011.
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
- G30 - Financial Economics - - Corporate Finance and Governance - - - General
- O16 - Economic Development, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
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