Work

Relationship Bank Behavior during Borrower Distress

Year: 2018

Type: article

Abstract: This article provides a comprehensive examination of the time-series behavior of relationship banks around and during borrower distress. Relationship and outside loans have similar interest rates during distress and even 2 years prior to distress. Relative to outside loans in distress, relationship loans in distress have lower maturity. The fraction of bank lending given by relationship banks reduces during borrower distress. Overall, borrowers in distress do not derive benefits from relationship banks. These findings are inconsistent with models that suggest banks have an implicit commitment to help their borrowers in distress due to reputation concerns.

Source: Journal of Financial and Quantitative Analysis

DOI: 10.1017/s0022109018001084

Authors: Yan Li, Ruichang Lu, Anand Srinivasan

Institutions: World Bank, National University of Singapore

Language: English

Topic: Banking stability, regulation, efficiency

Subfield: Finance

Field: Economics, Econometrics and Finance

Domain: Social Sciences

Open Access status: green

OpenAlex ID: W3121365331

FWCI: 4.631

Cites: 72

Cited by: 65

Related to: 10