[go: up one dir, main page]
IDEAS home Printed from https://ideas.repec.org/p/zbw/zewdip/13018.html
   My bibliography  Save this paper

Corporate main bank decision

Author

Listed:
  • Höwer, Daniel
Abstract
Do firms select their main bank relationship according to their risk or risk preferences? Relationship banking is attractive for high risk firms since it improves their access to finance and provides liquidity insurance. Low risk firms instead may not want to bear the additional costs. I employ a nested logit model to study the determinants of the main bank relationship decision by newly established German firms. I find that firms that ask for bank support in case of financial distress are more likely to choose a relationship-oriented bank, such as a public or cooperative bank. Cost sensitive firms are more likely to choose a private bank. But I find no evidence that firms select a bank according to ex ante risk. Transaction oriented banks are not able to attract low risk firms.

Suggested Citation

  • Höwer, Daniel, 2013. "Corporate main bank decision," ZEW Discussion Papers 13-018, ZEW - Leibniz Centre for European Economic Research.
    • Handle: RePEc:zbw:zewdip:13018
    as

    Download full text from publisher

    File URL: https://www.econstor.eu/bitstream/10419/72466/1/74256035X.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Berlin, Mitchell & Mester, Loretta J., 1998. "On the profitability and cost of relationship lending," Journal of Banking & Finance, Elsevier, vol. 22(6-8), pages 873-897, August.
    2. Hans Degryse & Steven Ongena, 2005. "Distance, Lending Relationships, and Competition," Journal of Finance, American Finance Association, vol. 60(1), pages 231-266, February.
    3. James, Christopher, 1987. "Some evidence on the uniqueness of bank loans," Journal of Financial Economics, Elsevier, vol. 19(2), pages 217-235, December.
    4. Helmut Fryges & Sandra Gottschalk & Karsten Kohn, 2010. "The KfW/ZEW Start-up Panel: Design and Research Potential," Schmollers Jahrbuch : Journal of Applied Social Science Studies / Zeitschrift für Wirtschafts- und Sozialwissenschaften, Duncker & Humblot, Berlin, vol. 130(1), pages 117-132.
    5. Herrera, Ana María & Minetti, Raoul, 2007. "Informed finance and technological change: Evidence from credit relationships," Journal of Financial Economics, Elsevier, vol. 83(1), pages 223-269, January.
    6. Elsas, Ralf & Krahnen, Jan Pieter, 1998. "Is relationship lending special? Evidence from credit-file data in Germany," Journal of Banking & Finance, Elsevier, vol. 22(10-11), pages 1283-1316, October.
    7. Astrid Matthey, 2010. "Do public banks have a competitive advantage?," The European Journal of Finance, Taylor & Francis Journals, vol. 16(1), pages 45-55.
    8. Greenbaum, Stuart I. & Kanatas, George & Venezia, Itzhak, 1989. "Equilibrium loan pricing under the bank-client relationship," Journal of Banking & Finance, Elsevier, vol. 13(2), pages 221-235, May.
    9. Petersen, Mitchell A & Rajan, Raghuram G, 1997. "Trade Credit: Theories and Evidence," The Review of Financial Studies, Society for Financial Studies, vol. 10(3), pages 661-691.
    10. Nancy Huyghebaert & Linda Gucht & Cynthia Hulle, 2007. "The Choice between Bank Debt and Trace Credit in Business Start-ups," Small Business Economics, Springer, vol. 29(4), pages 435-452, December.
    11. Hella Engerer & Mechthild Schrooten, 2004. "Deutscher Bankensektor im Umbruch: Sparkassen und Genossenschaftsbanken relativ gut positioniert," DIW Wochenbericht, DIW Berlin, German Institute for Economic Research, vol. 71(24), pages 345-349.
    12. Arnoud W. A. Boot & Anjan V. Thakor, 2000. "Can Relationship Banking Survive Competition?," Journal of Finance, American Finance Association, vol. 55(2), pages 679-713, April.
    13. Chemmanur, Thomas J & Fulghieri, Paolo, 1994. "Reputation, Renegotiation, and the Choice between Bank Loans and Publicly Traded Debt," The Review of Financial Studies, Society for Financial Studies, vol. 7(3), pages 475-506.
    14. Brown, Martin & Degryse, Hans & Höwer, Daniel & Penas, María Fabiana, 2012. "How do banks screen innovative firms? Evidence from start-up panel data," ZEW Discussion Papers 12-032, ZEW - Leibniz Centre for European Economic Research.
    15. Hella Engerer, 2006. "Vom Dreisäulensystem zum Baustein des europäischen Hauses: Wandel von Eigentum und Wettbewerb im deutschen Bankensektor," Vierteljahrshefte zur Wirtschaftsforschung / Quarterly Journal of Economic Research, DIW Berlin, German Institute for Economic Research, vol. 75(4), pages 11-32.
    16. Elyasiani, Elyas & Goldberg, Lawrence G., 2004. "Relationship lending: a survey of the literature," Journal of Economics and Business, Elsevier, vol. 56(4), pages 315-330.
    17. Mitchell A. Petersen & Raghuram G. Rajan, 2002. "Does Distance Still Matter? The Information Revolution in Small Business Lending," Journal of Finance, American Finance Association, vol. 57(6), pages 2533-2570, December.
    18. Angelini, P. & Di Salvo, R. & Ferri, G., 1998. "Availability and cost of credit for small businesses: Customer relationships and credit cooperatives," Journal of Banking & Finance, Elsevier, vol. 22(6-8), pages 925-954, August.
    19. Fukuda, Shin-ichi & Kasuya, Munehisa & Akashi, Kentaro, 2009. "Impaired bank health and default risk," Pacific-Basin Finance Journal, Elsevier, vol. 17(2), pages 145-162, April.
    20. Rajan, Raghuram G, 1992. "Insiders and Outsiders: The Choice between Informed and Arm's-Length Debt," Journal of Finance, American Finance Association, vol. 47(4), pages 1367-1400, September.
    21. Berger, Allen N. & Black, Lamont K., 2011. "Bank size, lending technologies, and small business finance," Journal of Banking & Finance, Elsevier, vol. 35(3), pages 724-735, March.
    22. Hakenes, Hendrik & Schnabel, Isabel, 2011. "Capital regulation, bank competition, and financial stability," Economics Letters, Elsevier, vol. 113(3), pages 256-258.
    23. Hoewer, Daniel & Schmidt, Tobias & Sofka, Wolfgang, 2011. "An information economics perspective on main bank relationships and firm R&D," ZEW Discussion Papers 11-055, ZEW - Leibniz Centre for European Economic Research.
    24. Stiglitz, Joseph E & Weiss, Andrew, 1981. "Credit Rationing in Markets with Imperfect Information," American Economic Review, American Economic Association, vol. 71(3), pages 393-410, June.
    25. Cole, Rebel A., 1998. "The importance of relationships to the availability of credit," Journal of Banking & Finance, Elsevier, vol. 22(6-8), pages 959-977, August.
    26. Massimo Colombo & Luca Grilli, 2007. "Funding Gaps? Access To Bank Loans By High-Tech Start-Ups," Small Business Economics, Springer, vol. 29(1), pages 25-46, June.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Djedidi-Kooli, Salima, 2009. "L’accès au financement des PME en France : quel rôle joué par la structure du système bancaire ?," Economics Thesis from University Paris Dauphine, Paris Dauphine University, number 123456789/8354 edited by Etner, François.
    2. Höwer, Daniel, 2016. "The role of bank relationships when firms are financially distressed," Journal of Banking & Finance, Elsevier, vol. 65(C), pages 59-75.
    3. Norden, L., 2015. "The Role of Banks in SME Finance," ERIM Inaugural Address Series Research in Management EIA-2015-062-F&A, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam..
    4. Tlili, Rim, 2012. "Comment justifier la multibancarité au sein des PME ?," Economics Thesis from University Paris Dauphine, Paris Dauphine University, number 123456789/10919 edited by Etner, François.
    5. Durguner, Sena, 2017. "Do borrower-lender relationships still matter for small business loans?," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 50(C), pages 98-118.
    6. Kano, Masaji & Uchida, Hirofumi & Udell, Gregory F. & Watanabe, Wako, 2011. "Information verifiability, bank organization, bank competition and bank-borrower relationships," Journal of Banking & Finance, Elsevier, vol. 35(4), pages 935-954, April.
    7. Simon Cornée & David Masclet & Gervais Thenet, 2012. "Credit Relationships: Evidence from Experiments with Real Bankers," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 44(5), pages 957-980, August.
    8. Catherine Fuss & Philip Vermeulen, 2006. "The response of firms\u2019 investment and financing to adverse cash flow shocks : the role of bank relationships," Working Paper Research 87, National Bank of Belgium.
    9. Hakimi, Abdelaziz & Hamdi, Helmi, 2013. "The duration of bank relationships and the performance of Tunisian firms," MPRA Paper 55754, University Library of Munich, Germany, revised 2014.
    10. Annalisa Castelli & Gerald P. Dwyer & Iftekhar Hasan, 2006. "Bank relationships and small firms’ financial performance," FRB Atlanta Working Paper 2006-05, Federal Reserve Bank of Atlanta.
    11. Ferri, Giovanni & Murro, Pierluigi, 2015. "Do firm–bank ‘odd couples’ exacerbate credit rationing?," Journal of Financial Intermediation, Elsevier, vol. 24(2), pages 231-251.
    12. Tumer-Alkan, G., 2008. "Essays on banking," Other publications TiSEM 8d5ec521-4702-4e75-bc79-a, Tilburg University, School of Economics and Management.
    13. Allen N. Berger & Gregory F. Udell, 2002. "Small Business Credit Availability and Relationship Lending: The Importance of Bank Organisational Structure," Economic Journal, Royal Economic Society, vol. 112(477), pages 32-53, February.
    14. Nemoto, Tadanobu & Ogura, Yoshiaki & Watanabe, Wako, 2016. "Inside bank premiums as liquidity insurance," Journal of the Japanese and International Economies, Elsevier, vol. 42(C), pages 61-76.
    15. N. Berger, Allen & F. Udell, Gregory, 1998. "The economics of small business finance: The roles of private equity and debt markets in the financial growth cycle," Journal of Banking & Finance, Elsevier, vol. 22(6-8), pages 613-673, August.
    16. Keil, Jan, 2023. "Lending relationships when creditors are in control," Journal of Corporate Finance, Elsevier, vol. 79(C).
    17. Karlyn Mitchell & Douglas K. Pearce, 2004. "Which Loans are Relationship Loans? Evidence from the 1998 Survey of Small Business Finances," Journal of Entrepreneurial Finance, Pepperdine University, Graziadio School of Business and Management, vol. 9(2), pages 1-36, Summer.
    18. Simon Cornée, 2014. "Soft Information and Default Prediction in Cooperative and Social Banks," Journal of Entrepreneurial and Organizational Diversity, European Research Institute on Cooperative and Social Enterprises, vol. 3(1), pages 89-103, June.
    19. Ginés Hernández-Cánovas & Pedro Martínez-Solano, 2007. "Effect of the Number of Banking Relationships on Credit Availability: Evidence from Panel Data of Spanish Small Firms," Small Business Economics, Springer, vol. 28(1), pages 37-53, January.
    20. Hans Degryse & Steven Ongena, 2004. "The Impact of Competition on Bank Orientation and Specialization (new titel: The impact of competition on bank orientation)," CESifo Working Paper Series 1119, CESifo.

    More about this item

    Keywords

    Relationship Banking; Start-up; Entrepreneurship; Financing Choice;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • M13 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - New Firms; Startups

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:zbw:zewdip:13018. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ZBW - Leibniz Information Centre for Economics (email available below). General contact details of provider: https://edirc.repec.org/data/zemande.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.