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Long-lasting bank relationships and growth of firms

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  • Alessandro Gambini

    ()

  • Alberto Zazzaro

    ()

Abstract

A puzzling but consistent result in the empirical literature on banking is that firms with close bank ties do not grow faster than bank-independent firms. In this paper, we reconsider the link between relationship lending and firm growth, distinguishing firms by size and expansion/contraction conditions. The idea is that the beneficial effects of relationship lending on information asymmetries can be compensated by other negative capture, risk, and externality effects which make relational banks reluctant to support long-term growth projects of client firms, and that the strength of these compensating effects varies with firm size and health status. We explore the influence of long-lasting bank relationships on employment and asset growth of a large sample of Italian firms. The main finding is that relationship lending hampers the efforts of small firms to increase their size, while it mitigates the negative growth of troubled, medium–large enterprises. Copyright Springer Science+Business Media, LLC. 2013

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Bibliographic Info

Article provided by Springer in its journal Small Business Economics.

Volume (Year): 40 (2013)
Issue (Month): 4 (May)
Pages: 977-1007

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Handle: RePEc:kap:sbusec:v:40:y:2013:i:4:p:977-1007

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Web page: http://www.springerlink.com/link.asp?id=100338

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Keywords: Relationship lending; Capture effects; Firms’ growth; G21; G34;

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Cited by:
  1. Pietro Alessandrini & Andrea Filippo Presbitero & Alberto Zazzaro, 2008. "Global Banking and Local Markets," Mo.Fi.R. Working Papers 4, Money and Finance Research group (Mo.Fi.R.) - Univ. Politecnica Marche - Dept. Economic and Social Sciences.
  2. Yu-Fu Chen & Michael Funke, 2010. "Global Warming and Extreme Events: Rethinking the Timing and Intensity of Environmental Policy," CESifo Working Paper Series 3139, CESifo Group Munich.
  3. 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.
  4. Alessandro Giovannini & Maurizio Iacopetta & Raoul Minetti, 2013. "Financial markets, Banks, and Growth : disentangling the links," Documents de Travail de l'OFCE 2013-23, Observatoire Francais des Conjonctures Economiques (OFCE).
  5. Andrea Bellucci & Alexander V. Borisov & Alberto Zazzaro, 2013. "Do Banks Price Discriminate Spatially? Evidence from Small Business Lending in Local Credit Markets," Mo.Fi.R. Working Papers 79, Money and Finance Research group (Mo.Fi.R.) - Univ. Politecnica Marche - Dept. Economic and Social Sciences.

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