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Lending Relationships in Germany: Empirical Results from Survey Data

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  • Dietmar Harhoff
  • Timm Körting

Abstract

We examine empirically the role of lending relationships in determining the collateral requirements, costs and availability of external funding. The data originate from a recently concluded survey of small and medium-sized German firms. In our descriptive analysis, we explore the borrowing patterns and the concentration of borrowing from financial institutions. Using data on line of credit (L/C) interest rates, collateral requirements, and the firms’ use of fast payment discounts we find that relationship variables may have some bearing on the price of external funds, but much more so on loan collateralization and availability. Firms in financial distress face comparatively high L/C interest rates and reduced credit availability. ZUSAMMENFASSUNG - (Kreditbeziehungen in Deutschland: Empirische Ergebnisse einer Unternehmensbefragung) Unter Verwendung eines für Deutschland einzigartigen Querschnittsdatensatzes untersuchen wir in diesem Papier empirisch den Einfluß von Bankbeziehungen auf die Kosten und die Verfügbarkeit von Bankkrediten. Die Daten wurden im Jahre 1997 bei 1509 kleinen und mittleren Unternehmen (KMU) erhoben. In einer ersten deskriptiven Analyse werden Finanzierungsmuster und Verschuldungskonzentration dargestellt. Detaillierte Angaben zu Kontokorrent- und Lieferantenkrediten ermöglichen es uns, in einer mikroökonomischen Analyse die Einflußfaktoren auf die Kosten und die Verfügbarkeit von Krediten zu bestimmen. Demnach scheinen Bankbeziehungen einen wesentlich stärkeren Einfluß auf die Verfügbarkeit als auf die Preisgestaltung von Krediten zu haben. Außerdem führen finanzielle Schwierigkeiten eines Unternehmens zu einer Verteuerung von Kontokorrentkrediten und einer sinkenden Kreditverfügbarkeit.

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Bibliographic Info

Paper provided by Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG) in its series CIG Working Papers with number FS IV 98-06.

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Length: 48 pages
Date of creation: Jun 1998
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Publication status: Published in the Journal of Banking and Finance , Vol. 22(10-11), October 1998, pp. 1317-1353.
Handle: RePEc:wzb:wzebiv:fsiv98-6

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  1. Gregory E. Elliehausen & John D. Wolken, 1993. "The demand for trade credit: an investigation of motives for trade credit use by small businesses," Staff Studies 165, Board of Governors of the Federal Reserve System (U.S.).
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  3. Petersen, Mitchell A & Rajan, Raghuram G, 1995. "The Effect of Credit Market Competition on Lending Relationships," The Quarterly Journal of Economics, MIT Press, vol. 110(2), pages 407-43, May.
  4. Harhoff, Dietmar & Stahl, Konrad O. & Woywode, Michael, 1995. "Growth and exit of West German firms: an empirical investigation on the impact of liability statutes," ZEW Discussion Papers 95-15, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
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  7. Dietmar Harhoff, 1997. "Are There Financing Constraints for R&D and Investment in German Manufacturing Firms?," CIG Working Papers FS IV 97-45, Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG).
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  10. Sharpe, Steven A, 1990. " Asymmetric Information, Bank Lending, and Implicit Contracts: A Stylized Model of Customer Relationships," Journal of Finance, American Finance Association, vol. 45(4), pages 1069-87, September.
  11. Franklin Allen & Douglas Gale, 1994. "A welfare comparison of intermediaries and financial markets in Germany and the U.S," Working Papers 95-3, Federal Reserve Bank of Philadelphia.
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  13. Gale, Douglas & Hellwig, Martin, 1985. "Incentive-Compatible Debt Contracts: The One-Period Problem," Review of Economic Studies, Wiley Blackwell, vol. 52(4), pages 647-63, October.
  14. Bhattacharya Sudipto & Thakor Anjan V., 1993. "Contemporary Banking Theory," Journal of Financial Intermediation, Elsevier, vol. 3(1), pages 2-50, October.
  15. Berger, Allen N & Udell, Gregory F, 1995. "Relationship Lending and Lines of Credit in Small Firm Finance," The Journal of Business, University of Chicago Press, vol. 68(3), pages 351-81, July.
  16. Mookherjee, Dilip & Png, Ivan, 1989. "Optimal Auditing, Insurance, and Redistribution," The Quarterly Journal of Economics, MIT Press, vol. 104(2), pages 399-415, May.
  17. Greenbaum, Stuart I. & Kanatas, George & Venezia, Itzhak, 1989. "Equilibrium loan pricing under the bank-client relationship," Journal of Banking & Finance, Elsevier, vol. 13(2), pages 221-235, May.
  18. Stiglitz, Joseph E & Weiss, Andrew, 1981. "Credit Rationing in Markets with Imperfect Information," American Economic Review, American Economic Association, vol. 71(3), pages 393-410, June.
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