“…1. Holdup costs are also present in Rajan (1992), Hauswald and Marquez (2003), Hauswald and Marquez (2006), Egli et al (2006), Black (2006) and Karapetyan and Stacescu (2014), among others. See also the discussion in Ioannidou and Ongena (2010). (H1) Firms switch banks from one period to the other.…”
We study loan conditions when bank branches close and rms subsequently transfer to a branch of another bank in the vicinity. Such transfer loans allow us for the rst time to observe the conditions granted when banks pool-price new applicants. Consistent with recent theoretical work on hold up in bank-rm relationships we nd that transfer loans do not receive the discount in loan rates that prevails when rms otherwise switch banks. We hereby critically augment recent empirical evidence on dynamic cycles in loan rates. JEL: G21, L11, L14
“…1. Holdup costs are also present in Rajan (1992), Hauswald and Marquez (2003), Hauswald and Marquez (2006), Egli et al (2006), Black (2006) and Karapetyan and Stacescu (2014), among others. See also the discussion in Ioannidou and Ongena (2010). (H1) Firms switch banks from one period to the other.…”
We study loan conditions when bank branches close and rms subsequently transfer to a branch of another bank in the vicinity. Such transfer loans allow us for the rst time to observe the conditions granted when banks pool-price new applicants. Consistent with recent theoretical work on hold up in bank-rm relationships we nd that transfer loans do not receive the discount in loan rates that prevails when rms otherwise switch banks. We hereby critically augment recent empirical evidence on dynamic cycles in loan rates. JEL: G21, L11, L14
“…The number of bank relationships that the firm maintains also negatively influences the length of and Marquez (2003and Marquez ( , 2006, the informational advantage is differentiated across banks. See also Egli, Ongena, and Smith (2006), Black (2008), and Karapetyan and Stacescu (2008). 2 von Thadden (2004) assumes that firms switch when the offer is strictly lower.…”
Section: B Empirical Findings In the Literaturementioning
This paper studies loan conditions when firms switch banks. Recent theoretical work on bank-firm relationships motivates our matching models. The dynamic cycle of the loan rate that we uncover is as follows: a loan granted by a new (outside) bank carries a loan rate that is significantly lower than the rates on comparable new loans from the firm's current (inside) banks. The new bank initially decreases the loan rate further but eventually ratchets it up sharply. Other loan conditions follow a similar economically relevant pattern. This bank strategy is consistent with the existence of hold-up costs in bank-firm relationships.
“…In Hauswald and Marquez (2003, 2006), the informational advantage is differentiated across banks. See also Egli, Ongena, and Smith (2006), Black (2008), and Karapetyan and Stacescu (2008).…”
This paper studies loan conditions when firms switch banks. Recent theoretical work on bank-firm relationships motivates our matching models. The dynamic cycle of the loan rate that we uncover is as follows: a loan granted by a new (outside) bank carries a loan rate that is significantly lower than the rates on comparable new loans from the firm's current (inside) banks. The new bank initially decreases the loan rate further but eventually ratchets it up sharply. Other loan conditions follow a similar economically relevant pattern. This bank strategy is consistent with the existence of hold-up costs in bank-firm relationships.
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