Competition, specialization and bank-firm interaction: What happens in credit crunch periods?

Stefano Monferra', Irma Malafronte, Stefano Monferrà, Claudio Porzio, Gabriele Sampagnaro

Research output: Contribution to journalArticle

4 Citations (Scopus)

Abstract

This article empirically investigates the relationship between interbank competition, bank orientation and credit availability for a sample of more than 30 000 loans granted by a large banking group operating in the Italian credit market. We test whether and how, during a credit crunch period, competition affects bank orientation and how relationship lending and interbank competition can mitigate the credit crunch problem, for financially distressed firms. Using a unique and large bank-firm level data set, the main results show that an increase in competition is associated with a stronger relationship in terms of the length of the bank-borrower interaction, whereas the distance bank branch-headquarter negatively affects it. Moreover, a strong lender-borrower relationship, in terms of length and exclusivity, is found positively significant in determining the change in the amount of credit granted. Nonlinearity and sector specialization effects are tested, too, and report interesting results, supporting the crucial role of relationship lending during a financial crisis. © 2014 Taylor & Francis.
Original languageEnglish
Pages (from-to)557-571
Number of pages15
JournalAPPLIED FINANCIAL ECONOMICS
Volume24
DOIs
Publication statusPublished - 2014

Keywords

  • Economics and Econometrics
  • Finance
  • competition
  • financial crisis
  • relationship lending
  • sector specialization

Fingerprint

Dive into the research topics of 'Competition, specialization and bank-firm interaction: What happens in credit crunch periods?'. Together they form a unique fingerprint.

Cite this