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Lending relationships and credit rationing: the impact of securitization

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  • Carbo Valverde, S.
  • Degryse, H.A.
  • Rodriguez-Fernandez, F.

    (Tilburg University, Center for Economic Research)

Abstract

Do lending relationships mitigate credit rationing? Does securitization influence the impact of lending relationships on credit rationing? If so, is its impact differently in normal periods versus crisis periods? This paper combines several unique data sets to address these questions. Employing a disequilibrium model to identify credit rationing, we find that more intense lending relationships, measured through their length and lower number, considerable improve credit supply and reduce the degree of credit rationing. In general, we find that a relationship with a bank that is more involved in securitization activities relaxes credit constraints in normal periods; however, it also increases credit rationing during crisis periods. Finally, we study the impact of different types of securitization – covered bonds and mortgage-backed securities (MBS) – on credit rationing. While both types of securitization reduce credit rationing in normal periods, the issuance of MBS by a firm’s main bank aggravates these firm’s credit rationing in crisis periods.

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Bibliographic Info

Paper provided by Tilburg University, Center for Economic Research in its series Discussion Paper with number 2011-128.

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Date of creation: 2011
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Handle: RePEc:dgr:kubcen:2011128

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Web page: http://center.uvt.nl

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Keywords: lending relationships; financial crisis; securitization;

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Cited by:
  1. Bedendo, Mascia & Bruno, Brunella, 2012. "Credit risk transfer in U.S. commercial banks: What changed during the 2007–2009 crisis?," Journal of Banking & Finance, Elsevier, vol. 36(12), pages 3260-3273.
  2. Emanuele Brancati, 2013. "The Real Side of the Financial Crisis: Banks' Exposure, Flight to Quality and Firms' Investment Rate," CEIS Research Paper 302, Tor Vergata University, CEIS, revised 18 Dec 2013.

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