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The Benefits of Relationship Lending in a Cross-Country Context: A Meta-Analysis

Author

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  • Vlado Kysucky

    () (Shenzhen University International Business School, Shenzhen 518060, China)

  • Lars Norden

    () (Brazilian School of Public and Business Administration, Getulio Vargas Foundation, 22250-900 Rio de Janeiro, Brazil)

Abstract

Relationship lending may create benefits for borrowers by reducing information asymmetries. However, empirical evidence is mixed. We conduct a meta-analysis to summarize and explain the heterogeneity in the results in the literature using hand-collected information from 101 studies in the United States, Europe, Asia, and Latin America from 1970 to 2010. We find that strong relationships are generally beneficial for borrowers, but lending outcomes differ across the relationships’ dimensions. Long-lasting, exclusive, and synergy-creating bank relationships are associated with higher credit volume and lower loan rates. These benefits are more likely in the United States and in countries where bank competition is high. They are not related to the importance of small and medium-sized enterprises in an economy, suggesting that prevalence of relationship lending does not necessarily come along with borrower benefits. Our inferences are robust when we control for observed systematic heterogeneity in the original studies and hold in a bootstrapping analysis.Data, as supplemental material, are available at http://dx.doi.org/10.1287/mnsc.2014.2088 . This paper was accepted by Wei Jiang, finance .

Suggested Citation

  • Vlado Kysucky & Lars Norden, 2016. "The Benefits of Relationship Lending in a Cross-Country Context: A Meta-Analysis," Management Science, INFORMS, vol. 62(1), pages 90-110, January.
  • Handle: RePEc:inm:ormnsc:v:62:y:2016:i:1:p:90-110
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    File URL: http://dx.doi.org/10.1287/mnsc.2014.2088
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    References listed on IDEAS

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    1. Berlin, Mitchell & Mester, Loretta J, 1999. "Deposits and Relationship Lending," Review of Financial Studies, Society for Financial Studies, vol. 12(3), pages 579-607.
    2. La Porta, Rafael & Lopez-de-Silanes, Florencio & Shleifer, Andrei & Vishny, Robert, 1999. "The Quality of Government," Journal of Law, Economics, and Organization, Oxford University Press, vol. 15(1), pages 222-279, April.
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    18. Lars Norden & Martin Weber, 2010. "Credit Line Usage, Checking Account Activity, and Default Risk of Bank Borrowers," Review of Financial Studies, Society for Financial Studies, vol. 23(10), pages 3665-3699, October.
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    Cited by:

    1. repec:eee:jfinin:v:31:y:2017:i:c:p:16-29 is not listed on IDEAS
    2. Martin Brown & Matthias Hoffmann, 2016. "Relationship Banking in the Residential Mortgage Market? Evidence from Switzerland," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 152(I), pages 23-48, March.
    3. Fungáčová, Zuzana & Shamshur, Anastasiya & Weill, Laurent, 2017. "Does bank competition reduce cost of credit? Cross-country evidence from Europe," Journal of Banking & Finance, Elsevier, vol. 83(C), pages 104-120.
    4. repec:spr:cejnor:v:26:y:2018:i:1:d:10.1007_s10100-017-0484-9 is not listed on IDEAS
    5. Degryse, Hans & Karapetyan, Artashes & Karmakar, Sudipto, 2018. "To Ask or Not To Ask? Bank Capital Requirements and Loan Collateralization," CEPR Discussion Papers 13331, C.E.P.R. Discussion Papers.
    6. repec:spr:sjecst:v:152:y:2016:i:1:d:10.1007_bf03399421 is not listed on IDEAS
    7. de Haas, Ralph & Lu, Liping & Ongena, S.R.G., 2018. "Clear and Close Competitors? : On the Causes and Consequences of Bilateral Competition between Banks," Discussion Paper 2018-027, Tilburg University, Center for Economic Research.

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