Credit Market Concentration, Relationship Lending and the Cost of Debt

Bonini, Stefano; Dell’Acqua, Alberto; Fungo, Matteo; Kysucky, Vlado

doi:10.2139/ssrn.2745608

Cited by 6 publications

(11 citation statements)

References 33 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…Therefore, relationship profits resemble a nonmonotonous 'V-shaped' function of the switching costs and, consequently, an 'inverted V-shaped' function of competition. Bonini et al (2016) point out that the intensity of relationship lending and market competition could jointly influence the cost of borrowing for firms. According to the authors, this outcome could explain the controversial results of previous literature on the impact of relationship lending on the cost of credit.…”

Section: Level Of Market Competitionmentioning

confidence: 99%

See 1 more Smart Citation

Is Relationship Lending Still a Mixed Blessing? A Review of Advantages and Disadvantages for Lenders and Borrowers

Duqi

Tomaselli

Torluccio

2017

Journal of Economic Surveys

View full text Add to dashboard Cite

Relationship lending is a common lending technology that is assumed to bring several benefits to small‐medium enterprises (SMEs) and to financial institutions that adopt it. Notably, it could reduce information asymmetries, permitting banks to offer better credit terms to the borrower. However, it also entails some costs for both sides. The empirical evidence so far has not been conclusive in determining under what conditions relationship lending can be beneficial or harmful. Most of the studies suggest that SMEs that engage in relationship lending benefit from more credit availability (especially during a financial crisis), and lower interest rates. This occurs when they are served by small banks, are geographically close to the lender, when the bank is adequately decentralized and when it is the dominant creditor of the firm. However, under certain circumstances, banks can extract rents from the borrower or be captured by him. In addition, the consequences and the future of relationship lending will be remarkably affected by the level of competition among banks, their ownership structure, the regulatory framework and the business model that banks will have to adopt accordingly.

show abstract

Section: Level Of Market Competitionmentioning

confidence: 99%

“…Bonini et al . () point out that the intensity of relationship lending and market competition could jointly influence the cost of borrowing for firms. According to the authors, this outcome could explain the controversial results of previous literature on the impact of relationship lending on the cost of credit.…”

Section: Level Of Market Competitionmentioning

confidence: 99%

Is Relationship Lending Still a Mixed Blessing? A Review of Advantages and Disadvantages for Lenders and Borrowers

Duqi

Tomaselli

Torluccio

2017

Journal of Economic Surveys

View full text Add to dashboard Cite

show abstract

“…One critical component of bank lending decisions is information asymmetry between lender and borrower and banks have developed closer relationships with their customers to reduce such informational irregularities (Boot, 2000). Banks also manage their costs by cross selling different financial products to the same customer hence the need to reinforce the relationships with customers and foster customer loyalty (Bonini, Dell'ʹAcqua, Fungo and Kysucky, 2016). There are numerous other evident benefits to banks for maintaining long---term relationships with its customers (Ying and Yuande, 2013).…”

Section: Customer Alignment and Risk Management Systemsmentioning

confidence: 99%

Banks Business Models, Risk Management Systems And Small And Medium Enterprises Financing Proclivity In Zimbabwe

Mashamba¹,

Munyanyi²

2019

TR1010

View full text Add to dashboard Cite

The need to create sustainable ways of generating profits has put substantial pressure on banks to reinvent their business models in the post---global financial crisis era. The objectives of bank managers, which include profit maximization, essentially influence the bank's lending behavior, scale, choice, and timing. Among the constraints that small and medium businesses face is limited access to financing. An increase in bank involvement in the financing of small and medium enterprises is critical for the survival of the sector. Given the widespread heterogeneity in banks business models globally, this study, grounded on the Portfolio Management Theory, investigates how diversity in business models affects bank risk management systems and their proclivity to small and medium enterprises lending. Structural equation modeling, a confirmatory, multivariate technique, was employed to analyze the causal relationships between these variables, starting with a pictorial representation of the variables. The strong relationship between the variables under study suggests that business models and risk management systems are key components in the decision to lend to small and medium enterprises. As such there is need for banks to reconsider their business operations mechanisms in order to accommodate the small and medium enterprises sector.

show abstract

“…Long‐term refinancing operations (VLTROs) have a positive moderate‐sized effect on the supply of bank credit to small‐scale and medium‐scale firms (Posada & Marchetti, 2016). Credit market concentration, bank lending rates, and the loan to asset ratio are all factors that moderate the sensitivity of a firm's asset‐to‐growth opportunities (Bonini et al, 2016; Vithessonthi et al, 2017). Credit constraints and overall credit growth have a strong impact on firms' investment decisions and outward direct investments (Gandelman & Rasteletti, 2017; Gómez, 2019; Orive, 2016; Regis, 2018; Wang et al, 2016).…”

Section: Introductionmentioning

confidence: 99%

The combined impacts of fiscal and credit policies on green firm's investment opportunity: Evidences from Chinese firm‐level analysis

Chang

Liu

et al. 2021

Manage Decis Econ

View full text Add to dashboard Cite

This article investigates the combined impact of fiscal and credit policies on green‐firm investment opportunities using firm‐level panel data of green industries in China. Our empirical results demonstrate that subsidies, tax rebates, and green credit loans have significantly U‐shaped nexuses with green‐firm investment opportunities: Subsidies, tax rebates, and green credit policies generate significant interactions on green‐firm investment opportunities. External financing constraints may weaken the incentive of subsidies, tax rebates, and green credit loans on green‐firm investment opportunities.

show abstract

Credit Market Concentration, Relationship Lending and the Cost of Debt

Abstract: Credit market concentration, relationship lending and the cost of debt.

Cited by 6 publications

References 33 publications

Is Relationship Lending Still a Mixed Blessing? A Review of Advantages and Disadvantages for Lenders and Borrowers

Is Relationship Lending Still a Mixed Blessing? A Review of Advantages and Disadvantages for Lenders and Borrowers

Banks Business Models, Risk Management Systems And Small And Medium Enterprises Financing Proclivity In Zimbabwe

The combined impacts of fiscal and credit policies on green firm's investment opportunity: Evidences from Chinese firm‐level analysis

Contact Info

Product

Resources

About