Relationship lending,hierarchical distance and credit tightening: Evidence from the financial crisis |
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Authors: | Matteo Cotugno Stefano Monferrà Gabriele Sampagnaro |
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Institution: | 1. Department of Economics and Business, University of Catania, Corso Italia 55, 95129 Catania, Italy;2. Department of Management, University of Naples “Parthenope”, Via Amm. Ferdinando Acton 38, 80133 Naples, Italy |
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Abstract: | This paper examines the firms’ credit availability during the 2007–2009 financial crisis using a dataset of 5331 bank–firm relationships provided by borrowers’ credit folders of three Italian banks. It aims to test whether a strong lender–borrower relationship can produce less credit rationing for borrowing firms even during a credit crunch period. The results show that exclusivity of the relationship can mitigate the firm credit rationing. We also verify the influence of lending organizational structure during crisis. A new measure of distance in lending technologies has been introduced: the hierarchical distance calculated as the distance between the branch that originates the loan and the location of the hierarchical level responsible for financing decision. Our findings document a negative impact of distance on credit availability, consistent with the idea that proximity facilitates the transmission of soft information. |
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Keywords: | G20 G21 G32 |
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