BOFIT Discussion Papers, Institute for Economies in Transition, Bank of Finland
No 14/2014:
When arm’s length is too far. Relationship banking over the business cycle
Thorsten Beck ()
, Hans Degryse ()
, Ralph De Haas ()
and Neeltje van Horen ()
Abstract: Using a novel way to identify relationship and transaction
banks, we study how banks’ lending techniques affect funding to SMEs over
the business cycle. For 21 countries we link the lending techniques that
banks use in the direct vicinity of firms to these firms’ credit
constraints at two contrasting points of the business cycle. We show that
relationship lending alleviates credit constraints during a cyclical
downturn but not during a boom period. The positive impact of relationship
lending in an economic downturn is strongest for smaller and more opaque
firms and in regions where the downturn is more severe.
Keywords: relationship banking; credit constraints; business cycle; (follow links to similar papers)
JEL-Codes: F36; G21; L26; O12; O16; (follow links to similar papers)
42 pages, July 7, 2014
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