Time For A Change: Loan Conditions And Bank Behavior When Firms Switch

The authors study a unique database allowing them to follow each borrower and bank through an extended period of time. As a result, they can document the full dynamic cycle of conditions and behavior before and after firms switch banks. Their findings suggest that engaging a new outside bank decreases the rate paid on a new loan by more than 50 basis points. The new bank is willing to decrease loan rates further by another 35 basis points within the next year and a half. After that the new bank starts hiking its loan rate, slowly at first but eventually at a clip of more than 30 basis points per year.

Provided by: Tilburg University Topic: Software Date Added: Oct 2006 Format: PDF

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