IDEAS home Printed from
   My bibliography  Save this article

Relationship lending, default rate and loan portfolio quality


  • Matteo Cotugno
  • Valeria Stefanelli
  • Giuseppe Torluccio


This article empirically verifies the existence of a connection between the relationship-oriented model and the quality of the loan portfolio, by using alternative risk measures to previous studies. Consistently with earlier literature, bank size, distance and intensity of labour are used as proxies for the relationship lending model. The main results demonstrate that the relationship lending variables are all significant contributory factors to the loan portfolio quality. Robustness tests, conducted using intermediate risk measures (Doubtful Loan Rate (DLR), Past Due Loan Rate (PDLR)), confirm the results. Our findings are consistent with the relationship lending literature, but we extend to Default Rate (DR) measurement, a new role in terms of a banking model to create loans and manage credit risk. Finally, banking literature can take advantage of the DR indicator as a proxy for the quality of loan portfolio, and we consider its strong relationship to the intermediation model chosen.

Suggested Citation

  • Matteo Cotugno & Valeria Stefanelli & Giuseppe Torluccio, 2013. "Relationship lending, default rate and loan portfolio quality," Applied Financial Economics, Taylor & Francis Journals, vol. 23(7), pages 573-587, April.
  • Handle: RePEc:taf:apfiec:v:23:y:2013:i:7:p:573-587 DOI: 10.1080/09603107.2012.744133

    Download full text from publisher

    File URL:
    Download Restriction: Access to full text is restricted to subscribers.

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    1. Akram, Q. Farooq & Rime, Dagfinn & Sarno, Lucio, 2008. "Arbitrage in the foreign exchange market: Turning on the microscope," Journal of International Economics, Elsevier, vol. 76(2), pages 237-253, December.
    Full references (including those not matched with items on IDEAS)


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. Juha-Pekka Niinimäki, 2014. "Relationship Lending, Bank Competition and Financial Stability," Czech Economic Review, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, vol. 8(3), pages 102-124, December.

    More about this item


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:taf:apfiec:v:23:y:2013:i:7:p:573-587. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Chris Longhurst). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.