When arm's length is too far: Relationship banking over the credit cycle

T.H.L. Beck, H.A. Degryse, Ralph de Haas, Neeltje van Horen

Research output: Contribution to journalArticleScientificpeer-review

47 Citations (Scopus)

Abstract

Using a novel way to identify relationship and transaction banks, we study how banks’ lending techniques affect funding to SMEs over the business cycle. For 21 countries we link the lending techniques that banks use in the direct vicinity of firms to these firms’ credit constraints at two contrasting points of the business cycle. We show that relationship lending alleviates credit constraints during a cyclical downturn but not during a boom period. The positive impact of relationship lending in an economic downturn is strongest for smaller and more opaque firms and in regions where the downturn is more severe.
Original languageEnglish
Pages (from-to)174-196
JournalJournal of Financial Economics
Volume127
Issue number1
DOIs
Publication statusPublished - Jan 2018

Keywords

  • Relationship banking
  • credit constraints
  • Business cycle

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