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1. Using survey based data, we investigate factors influencing credit rationing within a
the firm-bank relationships and that the effects of relationship lending on rationing are
not identical for different firm size groups. Multiple-banking increases the probability of
rationing for small and large firms. Debt concentration with the main bank affects
positively smaller firms, while the opposite is true for large companies. The length of the
relationship with the main bank decreases the probability of rationing for both groups, but
more so for large firms endowed with more bargaining power. Finally, the firm-bank
spatial proximity, measured by the headquarters vicinity, does not affect the firms access
to credit.
2. Single-bank or multiple-bank relationship can play a role in the degree of corporate risk-
taking that inspires financing decisions. We study whether or not the magnitude of
corporate risk-taking is associated with bank relationship. We employ the public firms in
Taiwan with the sample period from 2001 to 2005 and select three variables centered on
earnings volatility and share price volatility as the proxies for corporate risk-taking. The
empirical evidence suggests that multiple-bank relationship can drive firms to take higher
risks under information asymmetry between banks and firms. The results remain
unchanged even after controlling for the main-bank effect. Finally, we observe that firms
with smaller size and higher growth opportunity tend to enhance the degree of corporate
firms using a unique data set covering the sample period of 19821999. Japanese listed
firms have about seven long-term bank loan relations on average, but show a large
variation around the mean. We use data on loan and equity ownership to address the
impact of the Japan-specific bankfirm relations and bank control on the number of loans
decision. We find that having a relation with a top-equity holding bank increases the
number of bank relations and debt-rich and cash-poor firms have more bank relations.
4. We study a representative dataset from Turkey that identifies firmbank connections.
Banks in Turkey differ not only in size and nationality, but also in ownership and
estimate a multinomial logit of the choice by the firm of bank type. We document a
strong correspondence between bank type and firm characteristics that is not always the
same as has been documented so far for US datasets. For example, small firms engage
large rather than small banks. Young, large, multiple-bank, and industry-diversified firms,
that are located in or close to Istanbul, team up with foreign banks. Islamic banks mainly
benefits to client firms. Our analyses focus on the case of Mizuho Holdings, which
became the largest bank in the world upon the merger of three large Japanese banks on
August 19, 1999. Our findings indicate that firms using one of the three banks as their
main bank or for large credit exposures did not experience the significant negative stock
price reactions of nonmain bank or lower credit exposure firms. Multiple regression
analyses reveal that, holding constant a number of firm-level characteristics, main bank
status was the most important determinant of bankfirm relationships in Japan. Further
tests suggest a lesser though significant role for the size of loans from the main bank
6. This study investigates the effects of close ties between firms and banks as measured by
the share and length of the relationship with the main bank, and by the number of lenders
on a firm's ability to develop innovation and introduce new products. As these effects
may vary depending on both the type of firm and innovation, this study provides results
for small and high-tech firms and distinguishes between process and product innovation.
The results suggest that for small firms banks do not intervene at the development stage
of an innovation but rather play their traditional role of financing investments for
constrained firms. In contrast, relationship banks do play an important role for high-tech
firms in the development of a process innovation and in the introduction of new products.
In addition, for both types of firms, the financing decision of the main bank seems to be
correlated with the lending behaviour of other banks, with multiple borrowing exerting a
lending main banks, the possibility arises of firmbank odd couples where opaque
firms end up matched with transactional main banks. We show that the probability of
credit rationing increases when the mismatch between firms and banks widens. Our
conjecture is that odd couples emerge either because of organizational changes in the
credit market or since firms observe only imperfectly banks lending technology.
8. This paper investigates the effects of a bank relationship on reducing a firm's financial
number of banks that a firm engages for its borrowing activities. A bank relationship is
further divided into two regimes, i.e., a strong and a weak bank relationship regime,
where the former is defined as one with smaller number of loan related-bank, and the
latter is one with a greater number. It is expected that a strong bank relationship reduces
the asymmetric information, i.e., investment cash-flow sensitivity here. Based on the
examination of unique Taiwanese bank transaction data, our results show that investment
is less sensitive to cash flow when a firm has a strong bank relationship. This implies that
the firm holds less cash flow in hand for future investment expenditures. By contrast,
when a firm has a weak bank relationship, the investment is sensitive to cash-flow. Our
results are robust regardless if the bank relationship is proxied by either the loan amount
or loan duration.
9. This paper studies differences in family and non-family firms' access to bank lending
during the 20072009 financial crisis. The hypothesis is that the former's incentive
structure results in less agency conflict in the borrowerlender relationship. Using highly
detailed data on bankfirm relations, we exploit the reduction in bank lending in Italy
following the crisis in October 2008. We find statistically and economically significant
evidence that credit to family firms contracted less sharply than that to non-family firms.
The results are robust to observable ex-ante differences between the two types of firms
and to time-varying bank fixed effects. We show, further, that the difference is related to
an increased role for soft information in some Italian banks' operations, following the
Lehman Brothers failure. Finally, by identifying a match between those banks and family
firms, we can control for time-varying unobserved heterogeneity among the firms and
Japan are often credited for reducing agency costs and increasing access to capital, thus
improving the performance of firms. Critics of these banking systems cite the alternative
possibility that conflicts of interests may also arise from both the banks multiple roles
with the firm, and the opportunity the banks have to use private information to shift risk
or to otherwise participate in rent-seeking activities. We extend the empirical literature by
performance of the firm. We find that bank-influenced firms in Germany do benefit from
increased access to capital. There is, however, no evidence to support the hypothesis of
either higher profitability or growth for bank-influenced firms. Results suggest that the
interest payments to debt ratio is significantly higher for bank-influenced firms, which
supports the hypothesis that German universal banks may engage in rent-seeking
shareholders.
11. This paper examines how the number of banking relationships affects the interaction
between managerial ownership and firm performance, and sheds light on the conditions
conflicts. Our results provide several interesting insights. We document that bank
monitoring has substantial value when managers are improperly incentivized, but that it
becomes less important when managers are properly incentivized. There is a substitution
monitoring. We also find that any existing free-riding concerns from having too many
banking relationships are problematical only when Tobin's Q is high and managerial
ownership is high.
12. Our paper seeks to examine the direct benefit of bank relationships for a distressed
borrower by assessing its influence on the success of firm private debt restructuring. We
find that a distressed firm with a stronger bank relationship has a greater probability to
credit rating recovery provides complementary evidence on the factors of successful debt
restructuring. A duration analysis of the length of time needed for a debt restructuring to
be completed is fully consistent with our documented results. We conclude that in a bank
dominated financial system like Taiwan's where firms are heavily bank-dependent, the
lending to informationally opaque small firms using a rich new data set on Argentinean
banks, firms, and loans. We also test hypotheses about borrowing from a single bank
versus multiple banks. Our results suggest that large and foreign-owned institutions may
have difficulty extending relationship loans to opaque small firms. Bank distress appears
to have no greater effect on small borrowers than on large borrowers, although even small
firms may react to bank distress by borrowing from multiple banks, raising borrowing
We control for firm-specific variables and find that the business cycle exerts important
influence on the number of bank relationships sustained by firms. Our evidence suggests
stronger for large firms which have more access to alternative sources of funding.
15. This study investigates the impact of the bankfirm relationship on IPO underpricing in
collected loan data for 902 Chinese IPO firms from 2004 to 2011, we document that the
bankfirm relationship reduces the degree of IPO underpricing. Both the lender's and the
borrower's firm characteristics affect the signal quality of the bankfirm relationship,
resulting in differential impacts on IPO underpricing. The relationship between firms and
banks with high credit quality or the relationship between politically unconnected firms
Using a sample of family firms in China, we find that the ownership of a controlling
family owner is negatively correlated with the level of executive compensation and has a
family members is positively associated with executive compensation and has a negative
governance is low and when other family members hold excess control rights in the firm,
the decision to file for reorganization for a sample of Taiwanese firms in default. We find
that bank relationships significantly influence the likelihood and duration of a firm's
decision on filing for reorganization. Firms with strong bank relationships exhibit
significantly decreased likelihood of filing for reorganization and increased length of time
needed for making the decision. The findings suggest that in a bank-oriented financial
system where banks are the dominant providers of capital, bank relationships better
enhance informational advantages for banks and reduce coordination problems among
information, while small banks have advantages in lending to smaller, less transparent
firms using soft information. We go beyond this paradigm to analyze the comparative
advantages of large and small banks in specific lending technologies. Our analysis begins
with the identification of fixed-asset lending technologies used to make small business
loans. Our results suggest that large banks do not have equal advantages in all of these
hard lending technologies and these advantages are not all increasing monotonically in
firm size, contrary to the predictions of the current paradigm. We also analyze lines of
small banks have a comparative advantage in relationship lending, but this appears to be
subject to moral hazard and monitoring is essential. Multiple-bank lending leads to higher
per-project monitoring whenever the benefit of greater diversification dominates the costs
of free-riding and duplication of effort. The model predicts a greater use of multiple-bank
lending when banks have lower equity, firms are less profitable and monitoring costs are
high. These results are consistent with some empirical observations concerning the use of
investment (FDI) and/or exports and if this nexus depends on the main bank itself being
internationalized. The analysis is carried out on matched micro-data from a large survey
of Italian manufacturing enterprises from 1998 to 2003. Our main result is that a longer
relationship with the main bank fosters firms FDI but does not affect exports. Moreover,
when the main bank has subsidiaries abroad this result is strengthened for FDI and there
is even a weak positive effect of the duration of the firmbank relationship on exports
21. This paper simultaneously investigates the responses of stock prices of the related banks
and the client firms when one of them is in distress. Two effects are examined. The
distressed bank effect, which claims that the stock price of client firms are coupled to that
of their related distress banks, and the distressed firm effect, which claims that the related
banks are negatively affected when their client firms are in distress. We collect the
detailed information of individual transaction loan data to find the relationship between
banks and their client firms. Asymmetric responses are reported in this paper. Our results
reject the distressed bank effect but, by contrast, cannot reject the distressed firm effect.
We propose the fund diversification hypothesis and the leverage hypothesis, and argue the
decoupling effect of the distressed bank and their listed firms, owing to the diversified
owned, and private domestic banksin banking relationships. Our application uses data
from India, an important developing nation. The empirical results are consistent with all
of our hypotheses with regard to foreign banks. First, these banks tend to establish
relationships with relatively transparent firms. Second, firms that have relationships with
foreign banks are more likely to enter into multiple banking relationships and to maintain
a larger number of such relationships. Finally, firms banking with foreign banks are more
likely than others to diversify relationships across bank ownership types. The data are
also consistent with the hypotheses that firms with relationships with state-owned banks
are relatively unlikely to maintain multiple banking relationships, tend to interact with a
smaller number of banks, and less often diversify across ownership types.
23. This paper investigates whether the benefits of bankborrower relationships differ
information, bank size and complexity, and bank competition. We extend the current
literature by analyzing how relationship lending affects loan contract terms and credit
availability in an empirical model that simultaneously accounts for all three of these
factors. Based on Japanese survey data we find evidence that the benefits from stronger
However, when the benefits are measured as improved credit terms, we find little
additional benefit, and in some cases increased cost, from stronger relationships for
opaque borrowers and for borrowers who get funding from small banks. These latter
findings suggest the possibility that relationship borrowers may suffer from capture
effects
24. We formulate and test hypotheses about the role of bank type small versus large, single-
market versus multimarket, and local versus nonlocal banks in banking relationships.
local institutions are better able to form strong relationships with informationally
tend to serve more transparent firms. Using the 2003 Survey of Small Business Finance
(SSBF), we conduct two sets of tests. First, we test for the type of bank serving as the
main relationship bank for small businesses with different firm and owner
characteristics. Second, we test for the strength of these main relationships by examining
functions of main bank type and financial fragility, as well as firm and owner
characteristics. The results are often not consistent with the conventional paradigm,
industry.
25. The role of companies and firms has been understood in terms of a commercial
However, in the past few years, as a consequence of rising globalisation and critical
ecological issues, the perception of the role of companies in the broader societal
26. The study proposed to analyse the impact of Firm characteristics toward Corporate
Social Responsibility expenditure. The variables used in this research are size of
firm, firm profitability, firm leverage, and sales of the firm. The populations are all
firm BSE 30 index in 2007-2012 periods. The analysis methods are using multiple
regression analysis. The research found that firm size, firm profitability, firm sales,
expenditure. In this paper we study the relevance of the gender of the contracting
parties involved in lending. We show that female entrepreneurs face tighter credit
availability, even though they do not pay higher interest rates. The effect is
control for unobservable individual effects. The gender of the loan officer is also
important: we find that female officers are more risk-averse or less self-confident
than male officers as they tend to restrict credit availability to new, un-established
27. We provide evidence on the link between busyness of CEOs and/or chairmen and
the performance of family firms in India. We show that the level of CEO busyness
has a negative effect on firm performance, measured by Tobin's q. That is, the
firms with a non-family-member CEO/chairman. Our findings show that the effect
of CEO busyness on Tobin's q is negative for small firms, and that the effect of
sample, it has a negative effect on Tobin's q in the high Tobin's q sample, implying
that firms with better growth opportunities should be managed by less busy CEOs.
28. The extant literature generally suggests that the performance of client firms
deteriorates if their distressed main bank reduces the supply of credit. However,
this insight is only consistent with the notion that main banks have an information
advantage over other banks to the extent that a client firm has trouble getting
access to credit if the firm changes its main bank. This paper shows that Japanese
firms did change their main banking relationship when their main banks become
distressed in a period with financial shocks. Surprisingly, these firms did not suffer
from loss of access to credit and actually their performance significantly improved
29. This paper investigates a firm's choice between borrowing from a single bank and
from two banks. The focus is on how this decision affects banks' equilibrium
monitoring intensities and loan rates. Two-bank lending suffers from duplication of
scale in monitoring. Thus, two-bank lending involves lower monitoring but not
necessarily higher loan rates than single-bank lending. The optimal borrowing
structure balances the benefit of monitoring for the firm in terms of higher success
probability of the project against its drawbacks of lower expected private return
and higher total monitoring costs. In contrast to the previous theoretical literature,
the model lays down an explanation for the empirical observation that multiple-
bank lending does not unambiguously increase loan rates or firms' quality, in
we find that venture capital (VC) monitoring is hampered in firms that experience
monitoring in firms that have greater managerial agency conflict, and thus require
market where firms have complex ownership structures that contribute to severe