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Lending technologies, banking relationships, and firms’ access to credit in Italy: the role of firm size

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  • Gabriele Angori
  • David Aristei
  • Manuela Gallo

Abstract

This paper analyses the role of lending technologies and banking relationships on firms’ credit access in Italy. Using EFIGE firm-level data, we show that the depth and strength of firm–bank relationships have heterogeneous effects on credit demand and rationing probabilities depending on the size of the borrower. Multiple banking relationships alleviate financial constraints for small firms, while borrowing from a large number of lenders hinders access to credit for large companies. Small and medium-sized enterprises with a higher share of debt with the main bank have a lower probability of being credit denied, as debt concentration contributes to overcome the opacity problems typical of the SMEs. Long-lasting relationships, by reducing information asymmetries, significantly improve access to credit for small and large firms. Conversely, we find that medium-sized enterprises are more exposed to financing constraints as relationship duration increases, due to possible lock-in effects. Finally, firms maintaining banking relationships based on transactional technologies are more likely to be credit denied, while the use of relationship lending technologies improves credit availability for both small and large enterprises.

Suggested Citation

  • Gabriele Angori & David Aristei & Manuela Gallo, 2019. "Lending technologies, banking relationships, and firms’ access to credit in Italy: the role of firm size," Applied Economics, Taylor & Francis Journals, vol. 51(58), pages 6139-6170, December.
    • Handle: RePEc:taf:applec:v:51:y:2019:i:58:p:6139-6170
    DOI: 10.1080/00036846.2019.1613503
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    Cited by:

    1. Pankaj C. Patel & Mike G. Tsionas, 2022. "Learning‐by‐lending and learning‐by‐repaying: A two‐sided learning model for defaults on Small Business Administration loans," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 43(4), pages 906-919, June.
    2. Gabriele Angori & David Aristei, 2020. "Heterogeneity and state dependence in firms’ access to credit: Microevidence from the euro area," SEEDS Working Papers 0220, SEEDS, Sustainability Environmental Economics and Dynamics Studies, revised Feb 2020.
    3. Angori, Gabriele & Aristei, David & Gallo, Manuela, 2020. "Banking relationships, firm-size heterogeneity and access to credit: Evidence from European firms," Finance Research Letters, Elsevier, vol. 33(C).
    4. Doucet, Pablo & Requejo, Ignacio, 2022. "Financing constraints and growth of private family firms: Evidence from different legal origins," Finance Research Letters, Elsevier, vol. 44(C).
    5. Ferri, Giovanni & Murro, Pierluigi & Pini, Marco, 2020. "Credit rationing and the relationship between family businesses and banks in Italy," Global Finance Journal, Elsevier, vol. 43(C).
    6. Hope Osayantin Aifuwa & Musa Saidu & Osaruese Cynthia Enehizena & Albert Osazevbaru, 2019. "Accounting Information And Lending Decision: Does Sustainability Disclosure Matter?," Copernican Journal of Finance & Accounting, Uniwersytet Mikolaja Kopernika, vol. 8(4), pages 61-89.
    7. Cheng, Chao & Yang, Liu, 2022. "What drives the credit constraints faced by Chinese small and micro enterprises?," Economic Modelling, Elsevier, vol. 113(C).
    8. Reto Wernli & Andreas Dietrich, 2022. "Only the brave: improving self-rationing efficiency among discouraged Swiss SMEs," Small Business Economics, Springer, vol. 59(3), pages 977-1003, October.
    9. David Aristei & Gabriele Angori, 2022. "Heterogeneity and state dependence in firms’ access to bank credit," Small Business Economics, Springer, vol. 59(1), pages 47-78, June.

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