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The Information Content from Lending Relationships Across the Supply Chain

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  • Theo Cotrim Martins
  • Rafael Schiozer
  • Fernando de Menezes Linardi

Abstract

Using unique administrative data on firm-to-firm payments and bank-to-firm lending, we investigate how lending to a firm is affected by same-bank lending to the firm’s customers and suppliers. We show that bank lending increases when the same bank also lends to the firm’s customers or suppliers. Additionally, we find that the revelation of negative information about the creditworthiness of a firm’s major customer causes an increase in the cost and a reduction in the duration of the loans provided to the firm. These results suggest that lending to firms connected through the supply chain conveys valuable information to banks.

Suggested Citation

  • Theo Cotrim Martins & Rafael Schiozer & Fernando de Menezes Linardi, 2023. "The Information Content from Lending Relationships Across the Supply Chain," Working Papers Series 577, Central Bank of Brazil, Research Department.
    • Handle: RePEc:bcb:wpaper:577
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    File URL: https://www.bcb.gov.br/content/publicacoes/WorkingPaperSeries/WP577.pdf
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    References listed on IDEAS

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