2022
DOI: 10.1093/rof/rfac041
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Lending Relationships and the Collateral Channel

Abstract: This article shows that lending relationships insulate corporate investment from fluctuations in collateral values. The sensitivity of corporate investment to changes in real-estate collateral values is halved when the length of relationship between a bank and a firm, or its board of directors, doubles. Long relationships with board members dominate relationships with the firm in dampening the collateral channel. Moreover, lending relationships with directors in their personal capacity insulate corporate inves… Show more

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Cited by 4 publications
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