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Bank-firm relations and the role of Mutual Guarantee Institutions during the crisis

Listed author(s):
  • Francesca Bartoli

    ()

    (UniCredit Group)

  • Giovanni Ferri

    ()

    (University of Bari)

  • Pierluigi Murro

    ()

    (University of Bari)

  • Zeno Rotondi

    ()

    (Unicredit Group)

We examine the role played by Mutual Guarantee Institutions (MGIs) in the lending policies undertaken by banks at the peak of the Great Crisis of 2007-2009. We address this issue by using a large database on Italian firms built from the credit files of UniCredit banking Group and focusing on small business. We provide an empirical analysis of the determinants of the probability that a borrowing firm will suffer financial tension and obtain two main innovative findings. First, we show that small firms supported by MGIs were less likely to experience financial tensions even at that time of utmost financial stress. Second, our empirical evidence shows that MGIs have played a signalling role beyond the simple provision of a collateral. This latter finding suggests that the information provided by MGIs turned out to be key for bank-firm relations as scoring and rating systems - being typically based on pro-cyclical indicators - had become less informative during the crisis.

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File URL: http://www.seriesworkingpapers.it/RePEc/bai/series/Economia-Series34.pdf
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Paper provided by Dipartimento di Economia e Finanza - Università degli Studi di Bari "Aldo Moro" in its series SERIES with number 0034.

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Length: 924
Date of creation: Jan 2011
Date of revision: Jan 2011
Handle: RePEc:bai:series:economia-series34
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Web page: http://www.uniba.it/ricerca/dipartimenti/dse

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  1. Honohan, Patrick, 2010. "Partial credit guarantees: Principles and practice," Journal of Financial Stability, Elsevier, vol. 6(1), pages 1-9, April.
  2. Berlin, Mitchell & Mester, Loretta J., 1998. "On the profitability and cost of relationship lending," Journal of Banking & Finance, Elsevier, vol. 22(6-8), pages 873-897, August.
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  8. Stock, James H & Wright, Jonathan H & Yogo, Motohiro, 2002. "A Survey of Weak Instruments and Weak Identification in Generalized Method of Moments," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(4), pages 518-529, October.
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  11. Columba, Francesco & Gambacorta, Leonardo & Mistrulli, Paolo Emilio, 2010. "Mutual guarantee institutions and small business finance," Journal of Financial Stability, Elsevier, vol. 6(1), pages 45-54, April.
  12. Bongini, Paola & Ferri, Giovanni & Hahm, Hongjoo, 2000. "Corporate Bankruptcy in Korea: Only the Strong Survive?," The Financial Review, Eastern Finance Association, vol. 35(4), pages 31-50, November.
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  14. Ferri, Giovanni & Tae Soo Kang & In-June Kim, 2001. "The value of relationship banking during financial crises : evidence from the Republic of Korea," Policy Research Working Paper Series 2553, The World Bank.
  15. Berger, Allen N. & Udell, Gregory F., 2006. "A more complete conceptual framework for SME finance," Journal of Banking & Finance, Elsevier, vol. 30(11), pages 2945-2966, November.
  16. Yamori, Nobuyoshi & Murakami, Akinobu, 1999. "Does bank relationship have an economic value?: The effect of main bank failure on client firms," Economics Letters, Elsevier, vol. 65(1), pages 115-120, October.
  17. Boot, Arnoud W. A., 2000. "Relationship Banking: What Do We Know?," Journal of Financial Intermediation, Elsevier, vol. 9(1), pages 7-25, January.
  18. Stiglitz, Joseph E & Weiss, Andrew, 1981. "Credit Rationing in Markets with Imperfect Information," American Economic Review, American Economic Association, vol. 71(3), pages 393-410, June.
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  20. Hoshi, Takeo & Kashyap, Anil & Scharfstein, David, 1990. "The role of banks in reducing the costs of financial distress in Japan," Journal of Financial Economics, Elsevier, vol. 27(1), pages 67-88, September.
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