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Relationship Lending and Entrepreneurial Behavior: Analyzing Empirical Evidences

In: Business Governance and Society

Author

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  • Fernando A. Moya Dávila

    (EGADE Business School)

Abstract

The goal of this chapter is to demonstrate empirically that relationship lending creates incentives for both banks and entrepreneurs to interact as lenders and borrowers. The discussion addresses the research questions of what happens (a) to the cost of credit as the relationship matures, (b) to the probability of default for the entrepreneurs as the relationship gets stronger, (c) to the probability of pledging collateral to the entrepreneurs and (d) to the value of the collateral as relationship increases. The empirical evidence suggests that relationship lending creates incentives, while facilitating monitoring and screening because it overcomes the information asymmetries and moral hazard problems that a transaction between lender and borrower carry. The empirical evidence is based on data acquired directly from a bank (Banorte) that lends to entrepreneurs.

Suggested Citation

  • Fernando A. Moya Dávila, 2019. "Relationship Lending and Entrepreneurial Behavior: Analyzing Empirical Evidences," Springer Books, in: Rajagopal & Ramesh Behl (ed.), Business Governance and Society, chapter 0, pages 321-347, Springer.
    • Handle: RePEc:spr:sprchp:978-3-319-94613-9_19
    DOI: 10.1007/978-3-319-94613-9_19
    as

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