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How does relationship banking influence credit financing? Evidence from the financial crisis

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  • Christa Hainz

    ()

  • Manuel Wiegand

    ()

Abstract

During the financial crisis asymmetric information in credit markets became moresevere. Did relationship banking help firms to avoid impaired credit financing andwhich credit financing problems did relationship banking help to circumvent? We usesurvey data for 1,139 German firms to analyze how relationship banking works. Wefind that it lowers the probability of higher information requirements from banks. Itdoes not, however, help to avoid constrained availability of bank credit. If credit isgranted, relationship banking makes deteriorated non-price contract terms (i.e. collateraland maturity) less likely. Its impact on interest rates is ambiguous.

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Bibliographic Info

Paper provided by Ifo Institute for Economic Research at the University of Munich in its series Ifo Working Paper Series with number Ifo Working Paper No. 157.

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Date of creation: 2013
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Handle: RePEc:ces:ifowps:_157

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Keywords: Credit financing; relationship banking; financial crisis; access to credit;

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  1. Stiglitz, Joseph E & Weiss, Andrew, 1981. "Credit Rationing in Markets with Imperfect Information," American Economic Review, American Economic Association, American Economic Association, vol. 71(3), pages 393-410, June.
  2. Erik Lehmann & Neuberger, Doris, 2000. "Do Lending Relationships Matter? Evidence from Bank Survey Data in Germany," CoFE Discussion Paper, Center of Finance and Econometrics, University of Konstanz 00-04, Center of Finance and Econometrics, University of Konstanz.
  3. Beck, Thorsten & Demirguc-Kunt, Asli & Laeven, Luc & Maksimovic, Vojislav, 2006. "The determinants of financing obstacles," Journal of International Money and Finance, Elsevier, Elsevier, vol. 25(6), pages 932-952, October.
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  6. Degryse, Hans & Van Cayseele, Patrick, 2000. "Relationship Lending within a Bank-Based System: Evidence from European Small Business Data," Journal of Financial Intermediation, Elsevier, Elsevier, vol. 9(1), pages 90-109, January.
  7. Steven A. Sharpe, 1989. "Asymmetric information, bank lending, and implicit contracts: a stylized model of customer relationships," Finance and Economics Discussion Series, Board of Governors of the Federal Reserve System (U.S.) 70, Board of Governors of the Federal Reserve System (U.S.).
  8. Beck, Thorsten & Levine, Ross & Loayza, Norman, 1999. "Finance and the sources of growth," Policy Research Working Paper Series, The World Bank 2057, The World Bank.
  9. Manju Puri & Jörg Rocholl & Sascha Steffen, 2011. "Global retail lending in the aftermath of the US financial crisis: Distinguishing between supply and demand effects," NBER Working Papers 16967, National Bureau of Economic Research, Inc.
  10. Rajan, Raghuram & Winton, Andrew, 1995. " Covenants and Collateral as Incentives to Monitor," Journal of Finance, American Finance Association, American Finance Association, vol. 50(4), pages 1113-46, September.
  11. Inderst, Roman & Mueller, Holger M., 2007. "A lender-based theory of collateral," Journal of Financial Economics, Elsevier, Elsevier, vol. 84(3), pages 826-859, June.
  12. Cole, Rebel A., 1998. "The importance of relationships to the availability of credit," Journal of Banking & Finance, Elsevier, Elsevier, vol. 22(6-8), pages 959-977, August.
  13. Thakor, Anjan V, 1996. " Capital Requirements, Monetary Policy, and Aggregate Bank Lending: Theory and Empirical Evidence," Journal of Finance, American Finance Association, American Finance Association, vol. 51(1), pages 279-324, March.
  14. Cole, Rebel A. & Goldberg, Lawrence G. & White, Lawrence J., 2004. "Cookie Cutter vs. Character: The Micro Structure of Small Business Lending by Large and Small Banks," Journal of Financial and Quantitative Analysis, Cambridge University Press, Cambridge University Press, vol. 39(02), pages 227-251, June.
  15. Gabriel Jimenez & Steven Ongena & Jose-Luis Peydro & Jesus Saurina, 2012. "Credit Supply and Monetary Policy: Identifying the Bank Balance-Sheet Channel with Loan Applications," American Economic Review, American Economic Association, American Economic Association, vol. 102(5), pages 2301-26, August.
  16. Boot, Arnoud W. A., 2000. "Relationship Banking: What Do We Know?," Journal of Financial Intermediation, Elsevier, Elsevier, vol. 9(1), pages 7-25, January.
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