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

  • 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.dse.uniba.it/Quaderni/SERIES/WP_0034.pdf
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Paper provided by Dipartimento di Scienze Economiche e Metodi Matematici - Università di Bari 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:wp0034
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Web page: http://www.dse.uniba.it

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  22. Columba, Francesco & Gambacorta, Leonardo & Mistrulli, Paolo Emilio, 2009. "The effects of mutual guarantee consortia on the quality of bank lending," MPRA Paper 17052, University Library of Munich, Germany, revised Mar 2009.
  23. Herrera, Ana María & Minetti, Raoul, 2007. "Informed finance and technological change: Evidence from credit relationships," Journal of Financial Economics, Elsevier, vol. 83(1), pages 223-269, January.
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