TY - JOUR
T1 - Credit market concentration, relationship lending and the cost of debt
AU - Bonini, Stefano
AU - Dell'Acqua, Alberto
AU - Fungo, Matteo
AU - Kysucky, Vlado
N1 - Publisher Copyright:
© 2016 Elsevier Inc.
PY - 2016/5/1
Y1 - 2016/5/1
N2 - We investigate how the banking industry concentration and the strength of credit relationships (relationship lending) jointly affect the cost of borrowing of firms. Our results indicate that relationship lending is not associated with the rent extraction mechanism deriving from informational lock-in. Conversely, market concentration appears to be associated with firms' higher cost of funding. But the effect is fully compensated if the relationship between the firm and the bank is long and comprehensive. Controlling for a number of covariates and for endogeneity concerns leaves results unchanged. Our results shed some new light on the unclear effects documented by Kysucky and Norden (2016) of relationship lending on the cost of financing.
AB - We investigate how the banking industry concentration and the strength of credit relationships (relationship lending) jointly affect the cost of borrowing of firms. Our results indicate that relationship lending is not associated with the rent extraction mechanism deriving from informational lock-in. Conversely, market concentration appears to be associated with firms' higher cost of funding. But the effect is fully compensated if the relationship between the firm and the bank is long and comprehensive. Controlling for a number of covariates and for endogeneity concerns leaves results unchanged. Our results shed some new light on the unclear effects documented by Kysucky and Norden (2016) of relationship lending on the cost of financing.
KW - Credit market concentration
KW - Lending technologies
KW - Relationship lending
KW - SME financing
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U2 - 10.1016/j.irfa.2016.03.013
DO - 10.1016/j.irfa.2016.03.013
M3 - Article
AN - SCOPUS:84962463353
SN - 1057-5219
VL - 45
SP - 172
EP - 179
JO - International Review of Financial Analysis
JF - International Review of Financial Analysis
ER -