The Efect of Relationship Lending on Firm Performance
AbstractWe examine how relationship lending affects firm performance using a panel dataset of about 70,000 small and medium Spanish firms in the period 1993-2004. We model firm performance jointly with the firm's choice of the number of bank relationships. Controlling for firm fixed effects and using instrumental variables for the decision on the number of bank relationships, we found that firms maintaining exclusive bank relationships have lower profitability. The result is consistent with the view that banks appropriate most of the value generated through close relationships with its borrowers as long as they do not face competition from other lenders
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Bibliographic InfoPaper provided by Department of Business Economics, Universitat Autonoma de Barcelona in its series Working Paper with number 200605.
Date of creation: Jun 2006
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This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-11-18 (All new papers)
- NEP-BAN-2006-11-18 (Banking)
- NEP-BEC-2006-11-18 (Business Economics)
- NEP-CFN-2006-11-18 (Corporate Finance)
- NEP-ENT-2006-11-18 (Entrepreneurship)
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- 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.
- Pietro Alessandrini & Andrea F. Presbitero & Alberto Zazzaro, 2009. "Banks, Distances and Firms' Financing Constraints," Review of Finance, European Finance Association, vol. 13(2), pages 261-307.
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