Does relationship lending promote growth? : Savings banks and SME financing

  • This paper addresses the question whether close borrower-lender relationships, so called hausbank-relationships, facilitate the funding and beneficial development of SME. To this end, we derive a model which relates a firm's growth rate to its need for external funds and subsequently compute the firms that exceed their predicted growth rate. We then use this measure to identify specific characteristics that are associated with long- and short-term financing of firm growth, in particular the influence of relationship lending. We find that close ties with savings banks predict firms' access to external finance to fund growth. Moreover, the long-term liabilities of firms with hausbank-relationships almost double those with multiple relationships while the overall leverage is about the same. In turn, we find an strong empirical relationship between the provision of long-term funds and firm growth. Keywords: small business lending, credit access, public banks JEL Classifications: G21, D21

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Author:Constantin F. SlottyGND
Place of publication:Frankfurt am Main
Document Type:Report
Date of Publication (online):2009/09/15
Year of first Publication:2009
Publishing Institution:Universit├Ątsbibliothek Johann Christian Senckenberg
Release Date:2009/09/15
Tag:credit access; public banks; small business lending
Issue:Version: April 2009
Page Number:27
First Draft: January 2009.
Institutes:Wissenschaftliche Zentren und koordinierte Programme / House of Finance (HoF)
Dewey Decimal Classification:3 Sozialwissenschaften / 33 Wirtschaft / 330 Wirtschaft
Licence (German):License LogoDeutsches Urheberrecht