| Abstract: | This paper analyses the influence of the number of past transactions on the continuity of the transaction relationship between a bank and a borrower. It is shown that banks, in deciding whether or not to maintain a transaction relationship with a borrower, fall into one of two categories: if the average of past returns from borrowers is equal, either a bank is more likely to maintain transaction relationships with those whose number of past transactions is larger, or it is indifferent to the number of past transactions. This result holds whether the bank is risk-averse or risk-neutral.
JEL Classification number: G21. |
