Abstract

http://ssrn.com/abstract=1102127
 
 

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Lending Relationships, Credit Availability, Firm Value and Banking Crises


Bo Sung Shin


Korea Securities Research Institute

Gregory F. Udell


Indiana University - Department of Finance

Sang Yong Park


Yonsei University

March 3, 2008


Abstract:     
We examine whether lending relationships enhance credit availability during banking crises when a bank's willingness to lend is weakest. Using a unique sample of listed firms in Korea we find that during the Asian financial crisis firms with closer banking relationships benefited from greater access to credit even from their undercapitalized banks. This finding persists even after controlling for "evergreening" behavior by undercapitalized banks. We also find that firms with closer banking relationship experienced smaller decrease in their firm values than those with weaker banking relationships. This casts doubt on the view that a shock to a closely-tied bank hurts its relationship borrowers relatively more badly and that firms thus ought to borrow from as many banks as possible.

Number of Pages in PDF File: 41

Keywords: G21

JEL Classification: lending relationship, credit availability, banking crisis

working papers series


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Date posted: March 8, 2008  

Suggested Citation

Shin, Bo Sung and Udell, Gregory F. and Park, Sang Yong, Lending Relationships, Credit Availability, Firm Value and Banking Crises (March 3, 2008). Available at SSRN: http://ssrn.com/abstract=1102127 or http://dx.doi.org/10.2139/ssrn.1102127

Contact Information

Bo Sung Shin
Korea Securities Research Institute ( email )
33 Yoido-dong
Yongdeungpo-ku
Seoul, 786-7570
Korea, Republic of (South Korea)
Gregory F. Udell
Indiana University - Department of Finance ( email )
1309 E. 10th St.
Bloomington, IN 47405
United States
Sang Yong Park (Contact Author)
Yonsei University ( email )
Seoul 120-749
Korea, Republic of (South Korea)
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