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Does face-to-face contact matter? Evidence on loan pricing

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Listed:
  • Giampaolo Gabbi
  • Michele Giammarino
  • Massimo Matthias
  • Stefano Monferrà
  • Gabriele Sampagnaro

Abstract

This paper focuses on the economic impact of the lender–borrower relationship on loan interest rates and tests whether repeated bank-firm contact significantly reduces these rates. We find strong evidence of the ‘relationship intensity’ hypothesis, and we detect a contribution of physical contact between banks and firms to loan pricing, controlling for the location where contact occurs. Finally, we report new evidence on the hold-up problem; in particular, we find that under certain circumstances, a closer relationship may alleviate extra borrowing costs.

Suggested Citation

  • Giampaolo Gabbi & Michele Giammarino & Massimo Matthias & Stefano Monferrà & Gabriele Sampagnaro, 2020. "Does face-to-face contact matter? Evidence on loan pricing," The European Journal of Finance, Taylor & Francis Journals, vol. 26(7-8), pages 820-836, May.
    • Handle: RePEc:taf:eurjfi:v:26:y:2020:i:7-8:p:820-836
    DOI: 10.1080/1351847X.2019.1703023
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    Cited by:

    1. Song Zhang & Liang Han & Konstantinos Kallias & Antonios Kallias, 2021. "The value of in-person banking: evidence from U.S. small businesses," Review of Quantitative Finance and Accounting, Springer, vol. 57(4), pages 1393-1435, November.
    2. Nadia Nahar Purkayastha & Şule Erdem Tuzlukaya, 2020. "Determination Of The Benefits And Risks Of Peer-To-Peer (P2p) Lending: A Social Network Teory Approach," Copernican Journal of Finance & Accounting, Uniwersytet Mikolaja Kopernika, vol. 9(3), pages 131-143.
    3. Giampaolo Gabbi & Michele Giammarino & Massimo Matthias, 2020. "Die Hard: Probability of Default and Soft Information," Risks, MDPI, vol. 8(2), pages 1-12, May.

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