Effect of the Number of Banking Relationships on Credit Availability: Evidence from Panel Data of Spanish Small Firms |
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Authors: | Ginés Hernández-Cánovas Pedro Martínez-Solano |
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Institution: | (1) Financial Economics and Accounting Department, Polytechnic University of Cartagena, Pl. del Cronista Isidoro Valverd, Edificio “La Milagrosa”, 30202 Cartagena CP, Spain;(2) Department of Business and Finance, University of Murcia, Spain |
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Abstract: | This paper investigates how the choice between single or multiple banking relationships affects credit availability for a
complete panel of small and medium-sized Spanish firms. The results seem to indicate the existence of rationing, since a substitution
relation has been found between trade and bank credit. We also analyse the relationship between the level of indebtedness
and the interest rate for each group of firms. The results show that those SMEs that work with fewer financial intermediaries
obtain fewer funds for the same increase in the interest rate, which indicates that these companies have more financial restraints. |
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Keywords: | banking relationships asymmetric information small business panel data interest rate and credit rationing |
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