Relationship lending - empirical evidence for Germany

Arbeitspapier

Relationship lending is a common practice in credit financing all over the world, notably also in the European Union, which has been assumed to be particularly beneficial for Small and Medium-Sized Enterprises (SMEs). During recent years, there has been the impression that relationship lending loses ground due to a change of the banks' business models, which could ultimately yield to a worsening of the business environment for corporates and SMEs. In this study, we investigate the determinants of relationship lending for Germany, where relationship lending traditionally plays an important role. Compared to previous studies, we refer to much more comprehensive data with information on more than 16,000 firm-bank relationships. Our findings confirm the assumption that relationship lending seems to be an important pillar for economic growth and employment: We find that the firms that are most likely to contribute to (future) economic growth, namely small and R&D-intensive firms, tend to choose a relationship lender. The same is observed for firms of high credit quality, independent of their size or R&D intensity. Furthermore, we also observe that the importance of relationship lending did not decrease since the mid 1990s.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Economic and Financial Report ; No. 2008/01

Classification and Topics

• Classification: Wirtschaft ; Banks; Depository Institutions; Micro Finance Institutions; Mortgages ; Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
• Subject: relationship banking ; German banking system ; SME

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Memmel, Christoph ; Schmieder, Christian ; Stein, Ingrid
• Event: Veröffentlichung
• (who): European Investment Bank (EIB)
• (where): Luxembourg
• (when): 2008

Further information

• Handle: http://hdl.handle.net/10419/45281
• Last update: 10.03.2025, 11:42 AM CET