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The importance of banking relationship for SME financing

Author

Listed:
  • Armando Mendes Jorge Nogueira da Silva

    (Instituto Politécnico do Porto; CEFUP (Centro de Investigação em Economia e Finanças da Universidade do Porto))

  • Silvia Maria Graça Braga

    (Instituto Politécnico do Porto)

Abstract

Taking, as starting point, a sample of small and medium-sized (SME) Portuguese companies customers of credit of a given bank branch, we examine empirically the role of both banking relationships and the economic and financial situation of the firms in the determination of the funding conditions obtained. Based on multiple regression analysis, it was found that, for the explanatory model of the level of the risk premium, the variables that showed significance for such explanation were the firm reputation, the amount of credit granted and also the overall liquidity of the customer. Regarding the explanatory model of the amount of credit granted, the variable duration has a significant impact, indicating that relationships are valuable in such issue. In both models, the variables that have shown to have a greater impact on the amount and price of the granted credit available were variables related to the economic and financial performance of the firms

Suggested Citation

  • Armando Mendes Jorge Nogueira da Silva & Silvia Maria Graça Braga, 2014. "The importance of banking relationship for SME financing," Brazilian Review of Finance, Brazilian Society of Finance, vol. 12(3), pages 291-397.
    • Handle: RePEc:brf:journl:v:12:y:2014:i:3:p:291-397
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    More about this item

    Keywords

    Financing; Banking; Relationship;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior

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