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Relationship Lending - Empirical Evidence For Germany

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  • Memmel, Christoph

    (Deutsche Bundesbank)

  • Schmieder, Christian

    (European Investment Bank)

  • Stein, Ingrid

    (Deutsche Bundesbank)

Abstract

Relationship lending is a common practice in credit financing all over the world, notably also in the European Union, which has been assumed to be particularly beneficial for Small and Medium-Sized Enterprises (SMEs). During recent years, there has been the impression that relationship lending loses ground due to a change of the banks' business models, which could ultimately yield to a worsening of the business environment for corporates and SMEs. In this study, we investigate the determinants of relationship lending for Germany, where relationship lending traditionally plays an important role. Compared to previous studies, we refer to much more comprehensive data with information on more than 16,000 firm-bank relationships. Our findings confirm the assumption that relationship lending seems to be an important pillar for economic growth and employment: We find that the firms that are most likely to contribute to (future) economic growth, namely small and R&D-intensive firms, tend to choose a relationship lender. The same is observed for firms of high credit quality, independent of their size or R&D intensity. Furthermore, we also observe that the importance of relationship lending did not decrease since the mid 1990s.

Suggested Citation

  • Memmel, Christoph & Schmieder, Christian & Stein, Ingrid, 2008. "Relationship Lending - Empirical Evidence For Germany," Economic and Financial Reports 2008/1, European Investment Bank, Economics Department.
  • Handle: RePEc:ris:eibefr:2008_001
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    Cited by:

    1. Goldbach, Stefan & Nitsch, Volker, 2015. "Cutting the credit line: Evidence from Germany," Discussion Papers 25/2015, Deutsche Bundesbank.
    2. Etumudon Ndidi Asien, 2016. "Determinants of Number of Bankers by Listed Nigerian Firms," International Journal of Academic Research in Accounting, Finance and Management Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Accounting, Finance and Management Sciences, vol. 6(2), pages 1-13, April.
    3. Ingrid Stein, 2015. "The Price Impact of Lending Relationships," German Economic Review, Verein für Socialpolitik, vol. 16(3), pages 367-389, August.
    4. Radu Cristian Mușetescu, 2012. "The Involvement Of Bankers In The Corporate Governance Of Non-Financial Firms," Anale. Seria Stiinte Economice. Timisoara, Faculty of Economics, Tibiscus University in Timisoara, vol. 0, pages 121-125, November.
    5. Holl, Dorothee & Schertler, Andrea, 2009. "Why do savings banks transform sight deposits into illiquid assets less intensively than the regulation allows?," Discussion Paper Series 2: Banking and Financial Studies 2009,05, Deutsche Bundesbank.
    6. Presbitero, Andrea F. & Zazzaro, Alberto, 2011. "Competition and relationship lending: Friends or foes?," Journal of Financial Intermediation, Elsevier, vol. 20(3), pages 387-413, July.
    7. Storm, Servaas & Naastepad, C.W.M., 2015. "Crisis and recovery in the German economy: The real lessons," Structural Change and Economic Dynamics, Elsevier, vol. 32(C), pages 11-24.
    8. Lucie Režňáková & Svatopluk Kapounek, 2015. "Is There a Credit Crunch in the Czech Republic?," Acta Universitatis Agriculturae et Silviculturae Mendelianae Brunensis, Mendel University Press, vol. 63(3), pages 995-1003.
    9. Haselmann, Rainer & Marsch, Katharina & Weder di Mauro, Beatrice, 2009. "Real Effects of Bank Governance: Bank Ownership and Corporate Innovation," CEPR Discussion Papers 7488, C.E.P.R. Discussion Papers.
    10. Hachem, Kinda, 2011. "Relationship lending and the transmission of monetary policy," Journal of Monetary Economics, Elsevier, vol. 58(6), pages 590-600.
    11. Gajewski, Krzysztof & Pawłowska, Małgorzata & Rogowski, Wojciech, 2012. "Relacje firm z bankami w Polsce w świetle danych ze sprawozdawczości bankowej [Bank-firm relationships in Poland in the light of data from bank reporting]," MPRA Paper 42544, University Library of Munich, Germany, revised 29 Oct 2012.
    12. Nitsch, Volker & Goldbach, Stefan, 2014. "Bank Credit and Trade: Evidence from Germany," Annual Conference 2014 (Hamburg): Evidence-based Economic Policy 100534, Verein für Socialpolitik / German Economic Association.
    13. Djedidi-Kooli, Salima, 2009. "L’accès au financement des PME en France : quel rôle joué par la structure du système bancaire ?," Economics Thesis from University Paris Dauphine, Paris Dauphine University, number 123456789/8354 edited by Etner, François.
    14. Paola Valbonesi & Federico Biagi, 2016. "Incentivising Innovation and Adoption of ICT: ICT Innovation Voucher Programmes," JRC Working Papers JRC104057, Joint Research Centre (Seville site).
    15. Servaas Storm & C.W.M. Naastepad, 2015. "Crisis and Recovery in the German Economy: The Real Lessons," Working Papers Series 10, Institute for New Economic Thinking.
    16. Njimanted, Godfrey Forgha & Tameta Serge & Nkwetta Ajong Aquilas, 2018. "Effects of Lending Relationship on the Interest Rates of Commercial Banks in Cameroon," Asian Journal of Economic Modelling, Asian Economic and Social Society, vol. 6(2), pages 208-219, June.
    17. Broz, Tanja & Ridzak, Tomislav, 2017. "Lending activity and credit supply in Croatia during the crisis," Journal of Policy Modeling, Elsevier, vol. 39(6), pages 1102-1116.
    18. Artur Tarassow, 2015. "Financial Investment Constraints. A Panel Threshold Application to German Firm Level Data," Macroeconomics and Finance Series 201405, University of Hamburg, Department of Socioeconomics.
    19. James Barth & Dongyun Lin & Keven Yost, 2011. "Small and Medium Enterprise Financing in Transition Economies," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 39(1), pages 19-38, March.
    20. Mager, Ferdinand & Schmieder, Christian, 2008. "Stress testing of real credit portfolios," Discussion Paper Series 2: Banking and Financial Studies 2008,17, Deutsche Bundesbank.
    21. Tlili, Rim, 2012. "Comment justifier la multibancarité au sein des PME ?," Economics Thesis from University Paris Dauphine, Paris Dauphine University, number 123456789/10919 edited by Etner, François.
    22. Ogura, Yoshiaki, 2012. "Lending competition and credit availability for new firms: Empirical study with the price cost margin in regional loan markets," Journal of Banking & Finance, Elsevier, vol. 36(6), pages 1822-1838.

    More about this item

    Keywords

    Relationship banking; German banking system; SME;

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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