Title: When arm's length is too far. Relationship banking over the business cycle
Authors: Beck, Thorsten
Degryse, Hans
De Haas, Ralph
Van Horen, Neeltje
Issue Date: 2014
Publisher: KU Leuven - Faculty of Economics and Business
Series Title: FEB Research Report AFI_1493 pages:1-51
Abstract: Using a novel way to identify relationship and transaction banks, we study how banks’lending techniques affect funding to SMEs over the business cycle. For 21 countries we link the lending techniques that banks use in the direct vicinity of firms to these firms’ credit constraints at two contrasting points of the business cycle. We show that relationship lending alleviates credit constraints during a cyclical downturn but not during a boom period. The positive impact of relationship lending in an economic downturn is strongest for smaller and more opaque firms and in regions where the downturn is more severe.
Publication status: published
KU Leuven publication type: IR
Appears in Collections:Research Center Finance, Leuven

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