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Relationships and The Availability of Credit To New Small Firms

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  • Colombatto, Enrico

    ()

  • Melnik, Arie

    ()

  • Monticone, Chiara

    ()

Abstract

We analyze the loans that small, newly established firms obtain from the banks by certain relationships based on a set of small, young Italian companies founded during the 1992–2004 period. According to our investigation, the amount of borrowing is determined primarily by the size of the firm, and the ability to offer collateral. Contrary to expectations, however perceived risk has a weak influence. The length of relationship influences borrowing in a non linear way.

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File URL: http://polis.unipmn.it/pubbl/RePEc/uca/ucaiel/iel006.pdf
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Bibliographic Info

Paper provided by Institute of Public Policy and Public Choice - POLIS in its series IEL Working Papers with number 6.

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Length: 27 pages
Date of creation: Jul 2011
Date of revision:
Handle: RePEc:uca:ucaiel:6

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Web page: http://polis.unipmn.it

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Keywords: young firms; bank loans; collateral; relationships;

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  1. Hirofumi Uchida & Gregory F. Udell & Wako Watanabe, 2008. "Bank size and lending relationships in Japan," NBER Chapters, in: Organizational Innovation and Firm Performance, pages 242-267 National Bureau of Economic Research, Inc.
  2. Jeffrey H. Nilsen, 1999. "Trade Credit and the Bank Lending Channel," Working Papers 99.04, Swiss National Bank, Study Center Gerzensee.
  3. Bianco, Magda & Casavola, Paola, 1999. "Italian corporate governance:: Effects on financial structure and firm performance," European Economic Review, Elsevier, vol. 43(4-6), pages 1057-1069, April.
  4. Aoife Hanley & Sourafel Girma, 2006. "New Ventures and their Credit Terms," Small Business Economics, Springer, vol. 26(4), pages 351-364, 05.
  5. Howard Bodenhorn, 2001. "Short-Term Loans and Long-Term Relationships: Relationship Lending in Early America," NBER Historical Working Papers 0137, National Bureau of Economic Research, Inc.
  6. Rajan, Raghuram & Winton, Andrew, 1995. " Covenants and Collateral as Incentives to Monitor," Journal of Finance, American Finance Association, vol. 50(4), pages 1113-46, September.
  7. Cole, Rebel, 2008. "What do we know about the capital structure of privately held firms? Evidence from the Surveys of Small Business Finance," MPRA Paper 8086, University Library of Munich, Germany.
  8. João A. C. Santos & Stanley D. Longhofer, 1998. "The importance of bank seniority for relationship lending," BIS Working Papers 58, Bank for International Settlements.
  9. Manove, Michael & Padilla, Atilano Jorge & Pagano, Marco, 2000. "Collateral Vs. Project Screening: A Model Of Lazy Banks," CEPR Discussion Papers 2439, C.E.P.R. Discussion Papers.
  10. Riding, Allan L. & HainesJR., George, 2001. "Loan guarantees: Costs of default and benefits to small firms," Journal of Business Venturing, Elsevier, vol. 16(6), pages 595-612, November.
  11. Manove, Michael & Padilla, A Jorge & Pagano, Marco, 2001. "Collateral versus Project Screening: A Model of Lazy Banks," RAND Journal of Economics, The RAND Corporation, vol. 32(4), pages 726-44, Winter.
  12. Craig, Steven G. & Hardee, Pauline, 2007. "The impact of bank consolidation on small business credit availability," Journal of Banking & Finance, Elsevier, vol. 31(4), pages 1237-1263, April.
  13. Arito Ono & Iichiro Uesugi, 2009. "Role of Collateral and Personal Guarantees in Relationship Lending: Evidence from Japan's SME Loan Market," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 41(5), pages 935-960, 08.
  14. Giannetti, Mariassunta, 2003. " Bank-Firm Relationships and Contagious Banking Crises," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 35(2), pages 239-61, April.
  15. Becchetti, Leonardo & Trovato, Giovanni, 2002. " The Determinants of Growth for Small and Medium Sized Firms: The Role of the Availability of External Finance," Small Business Economics, Springer, vol. 19(4), pages 291-306, December.
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