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Effect of the Number of Banking Relationships on Credit Availability: Evidence from Panel Data of Spanish Small Firms

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  • Ginés Hernández-Cánovas

    ()

  • Pedro Martínez-Solano

    ()

Abstract

This paper investigates how the choice between single or multiple banking relationships affects credit availability for a complete panel of small and medium-sized Spanish firms. The results seem to indicate the existence of rationing, since a substitution relation has been found between trade and bank credit. We also analyse the relationship between the level of indebtedness and the interest rate for each group of firms. The results show that those SMEs that work with fewer financial intermediaries obtain fewer funds for the same increase in the interest rate, which indicates that these companies have more financial restraints. Copyright Springer 2007

Suggested Citation

  • Ginés Hernández-Cánovas & Pedro Martínez-Solano, 2007. "Effect of the Number of Banking Relationships on Credit Availability: Evidence from Panel Data of Spanish Small Firms," Small Business Economics, Springer, vol. 28(1), pages 37-53, January.
  • Handle: RePEc:kap:sbusec:v:28:y:2007:i:1:p:37-53
    DOI: 10.1007/s11187-005-6704-z
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    Cited by:

    1. Damiano Bonardo & Stefano Paleari & Silvio Vismara, 2010. "The M&A dynamics of European science-based entrepreneurial firms," The Journal of Technology Transfer, Springer, vol. 35(1), pages 141-180, February.
    2. Martin Boyer, M. & Gobert, Karine, 2009. "The impact of switching costs on vendor financing," Finance Research Letters, Elsevier, vol. 6(4), pages 236-241, December.
    3. Tensie Steijvers & Wim Voordeckers & Koen Vanhoof, 2010. "Collateral, relationship lending and family firms," Small Business Economics, Springer, vol. 34(3), pages 243-259, April.
    4. repec:eee:reveco:v:51:y:2017:i:c:p:121-144 is not listed on IDEAS
    5. Zambaldi, Felipe & Aranha, Francisco & Lopes, Hedibert & Politi, Ricardo, 2011. "Credit granting to small firms: A Brazilian case," Journal of Business Research, Elsevier, vol. 64(3), pages 309-315, March.

    More about this item

    Keywords

    banking relationships; asymmetric information; small business; panel data; interest rate and credit rationing; G21; G24; G32;

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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