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The Efect of Relationship Lending on Firm Performance

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  • Judit Montoriol

    (Departament d'Economia de l'Empresa, Universitat Autonoma de Barcelona)

Abstract

We examine how relationship lending affects firm performance using a panel dataset of about 70,000 small and medium Spanish firms in the period 1993-2004. We model firm performance jointly with the firm's choice of the number of bank relationships. Controlling for firm fixed effects and using instrumental variables for the decision on the number of bank relationships, we found that firms maintaining exclusive bank relationships have lower profitability. The result is consistent with the view that banks appropriate most of the value generated through close relationships with its borrowers as long as they do not face competition from other lenders

Suggested Citation

  • Judit Montoriol, 2006. "The Efect of Relationship Lending on Firm Performance," Working Papers 200605, Departament Empresa, Universitat Autònoma de Barcelona.
    • Handle: RePEc:bbe:wpaper:200605
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    File URL: http://selene.uab.es/dep-economia-empresa/documents/06-5.pdf
    File Function: First version, 2006
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    Cited by:

    1. Alessandro Gambini & Alberto Zazzaro, 2013. "Long-lasting bank relationships and growth of firms," Small Business Economics, Springer, vol. 40(4), pages 977-1007, May.
    2. Pietro Alessandrini & Andrea F. Presbitero & Alberto Zazzaro, 2009. "Banks, Distances and Firms' Financing Constraints," Review of Finance, European Finance Association, vol. 13(2), pages 261-307.
    3. Pietro Alessandrini & Andrea Filippo Presbitero & Alberto Zazzaro, 2008. "Global Banking and Local Markets," Mo.Fi.R. Working Papers 4, Money and Finance Research group (Mo.Fi.R.) - Univ. Politecnica Marche - Dept. Economic and Social Sciences.
    4. Tumer-Alkan, G., 2008. "Essays on banking," Other publications TiSEM 8d5ec521-4702-4e75-bc79-a, Tilburg University, School of Economics and Management.

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