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

Stefano Monferra', Matteo Cotugno, Stefano Monferrà, Gabriele Sampagnaro

Research output: Contribution to journalArticle

51 Citations (Scopus)

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. © 2012 Elsevier B.V.
Original languageEnglish
Pages (from-to)1372-1385
Number of pages14
JournalJOURNAL OF BANKING & FINANCE
Volume37
DOIs
Publication statusPublished - 2013

Keywords

  • Distance
  • Economics and Econometrics
  • Finance
  • Financial crisis
  • Lending relationships
  • Soft information

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