IS RELATIONSHIP LENDING SPECIAL - EVIDENCE FROM CREDIT-FILE DATA IN GERMANY

Citation
R. Elsas et Jp. Krahnen, IS RELATIONSHIP LENDING SPECIAL - EVIDENCE FROM CREDIT-FILE DATA IN GERMANY, Journal of banking & finance, 22(10-11), 1998, pp. 1283-1316
Citations number
48
Categorie Soggetti
Business Finance",Economics
ISSN journal
03784266
Volume
22
Issue
10-11
Year of publication
1998
Pages
1283 - 1316
Database
ISI
SICI code
0378-4266(1998)22:10-11<1283:IRLS-E>2.0.ZU;2-V
Abstract
The German financial market is often characterized as a bank-based sys tem with strong bank-customer relationships. The corresponding notion of a housebank is closely related to the theoretical idea of relations hip lending. It is the objective of this paper to provide a direct com parison between housebanks and ''normal'' banks as to their credit pol icy. Therefore, we analyze a new data set, representing a random sampl e of borrowers drawn from the credit portfolios of five leading German banks over a period of five years. We use credit-file data rather tha n industry survey data and, thus, focus the analysis on information th at is directly related to actual credit decisions. In particular, we u se bank-internal borrower rating data to evaluate borrower quality, an d the bank's own assessment of its housebank status to control for inf ormation-intensive relationships. The major results of our study suppo rt the view that housebanks are able to establish a distinct behaviora l pattern consistent with the idea of long-term commitment. We find th at housebanks do provide liquidity insurance in situations of unexpect ed deterioration of borrower ratings. With respect to loan pricing, we find no evidence for intra- or intertemporal price differentiation re lated to house banking. (C) 1998 Elsevier Science B.V. All rights rese rved.