Relationship lending and small business finance: empirical relationship lending and small business finance: empirical analysis of cost of capital, credit rationing, and firm performance
This thesis investigates the sources of the value of lending relationships to the borrowing firm. After a first introductory chapter, Chapter 2 reviews the most relevant contributions to the relationship lending literature. Chapter 3 addresses the question of whether relationship lending is compatible with banking competition, using a survey of small firms in the United States. The main result is that relationship lending technologies are used in the most competitive banking markets as long as firms commit to borrowing from a single lender. Chapter 4 proposes an empirical strategy to disentangle the opposite theoretical predictions of exclusive bank-firm relationships: estimate the differential effect on cost and availability of credit depending on banking market concentration. Chapter 5 studies the effect of relationship lending on firm performance. For the last two chapters we use a panel dataset of 70,000 small and medium Spanish firms (1993-2004). The results are consistent with the view that banks appropriate most of the value generated through close relationships with its borrowers as long as they do not face competition from other lenders.
Advisor:Cuñat Martínez, Vicente
School:Universitat Pompeu Fabra
Source Type:Master's Thesis
Keywords:economia i empresa
Date of Publication:11/29/2006