Relationship lending, hierarchical distance and credit tightening: Evidence from the financial crisis

By M. Cotugno, S. Monferrà, Gabriele Sampagnaro. 2013

126 citations recorded by the source corpus.

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.

Subfields: Accounting, Finance

View Paper: https://www.semanticscholar.org/paper/1265d0036cb01d0d998874d0e04b1754b632e5cd

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Citations in the corpus

Small Bank Comparative Advantages in Alleviating Financial Constraints and Providing Liquidity Insurance over Time (2017, methodology): “7 This would be consistent with the efficient structure hypothesis of Demsetz (1973) and Peltzman (1977), under which firms that survive consolidation are generally more efficient than those that do not.”