The Role Of Relationship Lending And Lender-Borrower Distance During Financial Crisis

The purpose of this paper is to assess whether relationship lending was beneficial to borrowers during the 2007-2009 financial crisis. Using a proprietary firm-level database of around 18,000 loans relating to four medium-sized Italian banks, the authors observed that where there were intense relationships between banks and firms, borrowers enjoyed better and more permanent credit access conditions, even under circumstances of generalized credit access constraints. These findings are wholly in line with the literature, which recognizes how loans based on high quality information can produce benefits in terms of services offered and reduce credit rationing.

Provided by: University of Naples Topic: CXO Date Added: Jan 2011 Format: PDF

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