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Borrowing locally, operating globally? financing and trading patterns of firms during the economic crisis

Neugebauer, Katja and Spies, Julia (2012) Borrowing locally, operating globally? financing and trading patterns of firms during the economic crisis. EFIGE working paper (55). European Firms in a Global Economy, Brussels, Belgium.

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Abstract

The theory of relationship lending is based on the idea that close ties between borrowers and banks may be economically beneficial. Information asymmetries on the part of the bank introduce adverse selection and moral hazard problems into the lending process and may lead to a lengthy decision process and/or reduce the availability of credit for firms. The recent financial and economic crisis, which has been marked by increased uncertainty about the creditworthiness of firms, has reduced the quantity of available credit or raised its costs. Being able to turn to a main bank might reduce the problem of information asymmetries and enable firms to maintain access to credit in times of economic hardship. This paper investigates whether relationship lending has played a role in explaining crisis-related trade reductions at the firm level. We find no consistent impact of relationship lending on export reductions: Only in Italy, local banks have clearly shielded firms from trade reductions. Overall, factors such as the age, employment, and financial dependence of the firm are more robust determinants of export changes.

Item Type: Monograph (Working Paper)
Official URL: http://www.efige.org/
Divisions: Systemic Risk Centre
Subjects: H Social Sciences > HJ Public Finance
JEL classification: G - Financial Economics > G1 - General Financial Markets > G12 - Asset Pricing; Trading volume; Bond Interest Rates
Sets: Research centres and groups > Systemic Risk Centre
Date Deposited: 10 Jun 2014 16:32
Last Modified: 01 Jun 2020 23:12
URI: http://eprints.lse.ac.uk/id/eprint/57027

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