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Bank Relationships and Their Effects on Firm Performance Around the Asian Financial Crisis: Evidence from Taiwan

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  • Robert C.W. Fok
  • Yuan-Chen Chang
  • Wen-Tuz Lee
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    Abstract

    We evaluate the impact of bank relationships on firm performance for a sample of Taiwanese firms around the 1997 Asian financial crisis. We find a negative relation between the number of domestic-bank relationships and firm performance, but a positive relation between the number of foreign-bank relationships and firm performance. Firms explored new relationships with domestic banks and reduced their reliance on foreign banks during the crisis. Lending bank reputation and bank loan ratios are important factors explaining firm performance. Factors that affect banking relationships include borrowing firms’ profitability, age, size, and leverage, and the primary lending bank’s characteristics.

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    Bibliographic Info

    Article provided by Financial Management Association in its journal Financial Management.

    Volume (Year): 33 (2004)
    Issue (Month): 2 (Summer)
    Pages:

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    Handle: RePEc:fma:fmanag:fokchanglee04

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    Cited by:
    1. Alessandro Gambini & Alberto Zazzaro, 2010. "Long-Lasting Bank Relationships and Growth of Firms," CESifo Working Paper Series 3106, CESifo Group Munich.
    2. Doris Neuberger & Solvig Räthke, 2009. "Microenterprises and multiple bank relationships: The case of professionals," Small Business Economics, Springer, vol. 32(2), pages 207-229, February.
    3. Sohn, Wook, 2010. "Market response to bank relationships: Evidence from Korean bank reform," Journal of Banking & Finance, Elsevier, vol. 34(9), pages 2042-2055, September.
    4. Yu, Hai-Chin & Sopranzetti, Ben J. & Lee, Cheng-Few, 2012. "Multiple banking relationships, managerial ownership concentration and firm value: A simultaneous equations approach," The Quarterly Review of Economics and Finance, Elsevier, vol. 52(3), pages 286-297.
    5. Neuberger, Doris & Räthke, Solvig, 2006. "Microenterprises and multiple bank relationships: Evidence from a survey among professionals," Thuenen-Series of Applied Economic Theory 61, University of Rostock, Institute of Economics.
    6. Gajewski, Krzysztof & Pawłowska, Małgorzata & Rogowski, Wojciech, 2012. "Relacje firm z bankami w Polsce w świetle danych ze sprawozdawczości bankowej
      [Bank-firm relationships in Poland in the light of data from bank reporting]
      ," MPRA Paper 42544, University Library of Munich, Germany, revised 29 Oct 2012.
    7. Gabriel Jiménez & Jose A. Lopez & Jesús Saurina, 2007. "Empirical analysis of corporate credit lines," Working Paper Series 2007-14, Federal Reserve Bank of San Francisco.
    8. Tsou, Meng-Wen & Liu, Jin-Tan, 2005. "Wage dispersion and employment turnover in Taiwan," Economics Letters, Elsevier, vol. 88(3), pages 408-414, September.
    9. Pennathur, Anita & Smith, Deborah & Subrahmanyam, Vijaya, 2014. "The stock market impact of government interventions on financial services industry groups: Evidence from the 2007–2009 crisis," Journal of Economics and Business, Elsevier, vol. 71(C), pages 22-44.
    10. Degryse, Hans & Ongena, Steven, 2007. "The impact of competition on bank orientation," Journal of Financial Intermediation, Elsevier, vol. 16(3), pages 399-424, July.
    11. Gabriel Jiménez & Steven Ongena & José Luis Peydró & Jesús Saurina, 2009. "Hazardous times for monetary policy: What do twenty-three million bank loans say about the effects of monetary policy on credit risk-taking?," Banco de Espa�a Working Papers 0833, Banco de Espa�a.
    12. Lin, Xiaochi & Zhang, Yi & Zhu, Ning, 2009. "Does bank ownership increase firm value? Evidence from China," Journal of International Money and Finance, Elsevier, vol. 28(4), pages 720-737, June.
    13. Luo, Wei & Zhang, Yi & Zhu, Ning, 2011. "Bank ownership and executive perquisites: New evidence from an emerging market," Journal of Corporate Finance, Elsevier, vol. 17(2), pages 352-370, April.
    14. Huang, Jiang-Chuan & Huang, Chin-Sheng, 2011. "The effects of bank relationships on firm private debt restructuring: Evidence from an emerging market," Research in International Business and Finance, Elsevier, vol. 25(1), pages 113-125, January.
    15. Castelli , Annalisa & Dwyer, Gerald P & Hasan, Iftekhar, 2009. "Bank relationships and firms’ financial performance: the Italian experience," Research Discussion Papers 36/2009, Bank of Finland.
    16. Carol Lin & Yu-Chen Wei, 2006. "The Role of Business Ethics in Merger and Acquisition Success: An Empirical Study," Journal of Business Ethics, Springer, vol. 69(1), pages 95-109, November.
    17. Doris Neuberger & Maurice Pedergnana & Solvig Räthke-Döppner, 2008. "Concentration of Banking Relationships in Switzerland: The Result of Firm Structure or Banking Market Structure?," Journal of Financial Services Research, Springer, vol. 33(2), pages 101-126, April.
    18. Hakimi, Abdelaziz & Hamdi, Helmi, 2013. "The duration of bank relationships and the performance of Tunisian firms," MPRA Paper 55754, University Library of Munich, Germany, revised 2014.

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