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Relational Capital in Lending Relationships. Evidence from European Family Firms

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Abstract

We investigate the role of a family CEO’s relational capital and a non-family CEO’s managerial abilities in the context of bank relationships for a large sample of small- and medium-sized European firms. We begin by examining whether the relational capital embodied in the family leadership of the company influences the lending relationship with the bank in terms of information sensitivity and duration. Next, we test how banks value in their credit decisions the leadership of professionals and their managerial skills with respect to the relational capital of family CEOs. The results indicate that family businesses appointing managers from within the family are significantly more likely to maintain soft-information-based and longer-lasting lending relationships. However, family executives do not have a negative impact on the firm’s access to credit, while the creation of soft-information-based and long-lasting lending relationships significantly reduce the likelihood of experiencing credit restrictions. In view of these findings, family relational capital appears to have a univocal beneficial impact on the bank–firm relationship in our sample.

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  • Marco Cucculelli & Valentina Peruzzi & Alberto Zazzaro, 2018. "Relational Capital in Lending Relationships. Evidence from European Family Firms," CSEF Working Papers 491, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
  • Handle: RePEc:sef:csefwp:491
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    Cited by:

    1. Nhung LE, 2017. "The impact of family ownership status on determinants of leverage. Empirical evidence from South East Asia," Working Papers of LaRGE Research Center 2017-09, Laboratoire de Recherche en Gestion et Economie (LaRGE), Université de Strasbourg.
    2. Jeremie Bertrand & Pierluigi Murro, 2018. "Is trade credit a substitute for relationship lending credit?," CERBE Working Papers wpC25, CERBE Center for Relationship Banking and Economics.
    3. Giovanni Ferri & Pierluigi Murro & Valentina Peruzzi & Zeno Rotondi, 2017. "Bank lending technologies and credit availability in Europe. What can we learn from the crisis?," CERBE Working Papers wpC17, CERBE Center for Relationship Banking and Economics.
    4. Pierluigi Murro & Valentina Peruzzi, 2017. "Family firms and access to credit. Is family ownership beneficial?," CERBE Working Papers wpC23, CERBE Center for Relationship Banking and Economics.
    5. Giovanni Ferri & Pierluigi Murro & Marco Pini, 2018. "Credit Rationing and the Relationship Between Family Businesses and Banks in Italy," CERBE Working Papers wpC24, CERBE Center for Relationship Banking and Economics.

    More about this item

    Keywords

    Family firm; family CEO; soft information; relational capital; relationship lending; credit rationing;

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies

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