Relationship Lending in a Financial Turmoil

Abstract

This paper sheds new light on the value of relationship lending by studying whether, after Lehman's default, banks provided a steadier ‡ow of credit and charged lower interest rates, to those …rms they established a closer relation with. By exploiting the presence of multiple banking relationships, we are able to control for …rms'and banks'unobserved characteristics. Results show that credit growth has been higher if: i) the lending relation was longer; ii) the distance between the bank and the …rm shorter; iii) the bank held a larger share of total credit. Similarly, banks increased the cost of credit less to …rms they had a longer relation with and they were closer to. We also explore whether the e¤ect of relationship lending depended upon bank or …rm characteristics, or on the concentration of the local credit market. Finally, we test whether the e¤ect of relationship lending changed during the crisis with respect to a pre-crisis period.

Bank Heterogeneity and Interest Rate Setting: What Lessons Have We Learned Since Lehman Brothers?

“…Following Albertazzi andMarchetti (2010) andDe Mitri et al (2010), we focus on the period after Lehman's default, which can reasonably be considered an unexpected shock. After Lehman's collapse, the uncertainty regarding banks' potential losses increased sharply, along with market risk aversion (Angelini et al, 2011).…”

Beyond Banks’ Capitalization: What Affects the Credit Lines?

“…Albareto and Finaldi Russo (2012) suggest that the difficulties to access to credit for vulnerable firms would also be extended to some companies from good potential. The problem is provided for the high fragmentation of banking relationships, which do not favor a solid relationship between banks and enterprises (De Mitri et al, 2010). Reduce fragmentation would benefit, in particular, innovative businesses, whose evaluation by external financiers is typically much more difficult.…”

The Management of the Branches of the Italian Banks between 1998 and 2015: A Comparative Analysis

“…Empirical evidence in the literature confirms a greater availability of credit for those businesses that have built up a well‐structured and intense relational flow with the bank over the years. Even in times of recession and depression, the benefits of a bank/enterprise relationship based on relationship lending are equally present for credit‐requesting entities, just as in other phases of the economic cycle (De Mitri et al , ; Malafronte et al ,…”