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Relationship lending, hierarchical distance and credit tightening: Evidence from the financial crisis

  • Cotugno, Matteo
  • Monferrà, Stefano
  • Sampagnaro, Gabriele
Registered author(s):

    This paper examines the firms’ credit availability during the 2007–2009 financial crisis using a dataset of 5331 bank–firm relationships provided by borrowers’ credit folders of three Italian banks. It aims to test whether a strong lender–borrower relationship can produce less credit rationing for borrowing firms even during a credit crunch period. The results show that exclusivity of the relationship can mitigate the firm credit rationing. We also verify the influence of lending organizational structure during crisis. A new measure of distance in lending technologies has been introduced: the hierarchical distance calculated as the distance between the branch that originates the loan and the location of the hierarchical level responsible for financing decision. Our findings document a negative impact of distance on credit availability, consistent with the idea that proximity facilitates the transmission of soft information.

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    Article provided by Elsevier in its journal Journal of Banking & Finance.

    Volume (Year): 37 (2013)
    Issue (Month): 5 ()
    Pages: 1372-1385

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    Handle: RePEc:eee:jbfina:v:37:y:2013:i:5:p:1372-1385
    Contact details of provider: Web page: http://www.elsevier.com/locate/jbf

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