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Microenterprises and Multiple Bank Relationships: Evidence from a Survey among Professionals

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Author Info
Doris Neuberger () (University of Rostock)
Solvig Räthke (University of Rostock)

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Abstract

An overview of previous evidence about relationship banking to SMEs shows that multiple banking relationships prevail even at small firms, but there is hardly evidence on the number of banking relationships held by micro firms. To close this gap, we use data from a survey conducted among professionals in Germany in 2002. Being self-employed persons acting in the services sector, professionals are mostly informationally opaque micro firms. To explain the number of their banking relationships, we investigate characteristics of the firm and its loan demand, characteristics of the housebank and its relationship to the borrower, and variables of bank market structure and regulation. Consistent with the theory of asymmetric information, we find that these firms hold a small number of bank relationships, which increases in firm size and age. An increase in the duration or importance of the housebank relationship does not induce multiple banking relationships as predicted by the hold-up theory. Professionals rather tend to hold multiple banking relationships to increase their credit availability and finance larger loans. The type of the housebank and local banking market concentration do not seem to matter. All in all, the results indicate that multiple bank relationships help to overcome credit rationing.

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Paper provided by University of Rostock, Institute of Economics, Germany in its series Thuenen-Series of Applied Economic Theory with number 61.

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Length: 29 pages
Date of creation: 2006
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Handle: RePEc:ros:wpaper:61

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Find related papers by JEL classification:
G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Mortgages
G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Capital and Ownership Structure

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References listed on IDEAS
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Schmieder, Christian & Memmel, Christoph & Stein, Ingrid, 2007. "Relationship lending: empirical evidence for Germany," Discussion Paper Series 2: Banking and Financial Studies 2007,14, Deutsche Bundesbank, Research Centre. [Downloadable!]
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