Article ID Journal Published Year Pages File Type
5089439 Journal of Banking & Finance 2013 14 Pages PDF
Abstract

This paper examines the firms' credit availability during the 2007-2009 financial crisis using a dataset of 5331 bank-firm relationships provided by borrowers' credit folders of three Italian banks. It aims to test whether a strong lender-borrower relationship can produce less credit rationing for borrowing firms even during a credit crunch period. The results show that exclusivity of the relationship can mitigate the firm credit rationing. We also verify the influence of lending organizational structure during crisis. A new measure of distance in lending technologies has been introduced: the hierarchical distance calculated as the distance between the branch that originates the loan and the location of the hierarchical level responsible for financing decision. Our findings document a negative impact of distance on credit availability, consistent with the idea that proximity facilitates the transmission of soft information.

► We test if a strong relationship can produce less credit rationing for firms. ► We introduce a new measure of distance in lending technologies. ► The exclusivity of the relationship can mitigate the firm credit rationing. ► We report a negative impact of distance on credit availability.

Related Topics
Social Sciences and Humanities Economics, Econometrics and Finance Economics and Econometrics
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