Relationship Lending and Denovo Banks: An Examination of Bank Lending to Small Farm Borrowers

29 Pages Posted: 31 Oct 2008

See all articles by Jalal D. Akhavein

Jalal D. Akhavein

Fitch Ratings Inc.

Lawrence G. Goldberg

University of Miami - Department of Finance

Lawrence J. White

New York University (NYU) - Leonard N. Stern School of Business, Department of Economics

Multiple version iconThere are 2 versions of this paper

Date Written: January 2002

Abstract

In this paper we examine the lending by small banks to small farms. We find that relationships, as measured by the length of tenure of farm operators, are positively related to bank lending. We also find that denovo banks have a positive tendency to lend to small farms, similar to the tendency of denovo banks to lend to small businesses generally. When existing relationships between borrowers and incumbent lenders are stronger, however, denovo banks have greater difficulties in lending to small farms. Finally, we find that, even within the category of small banks, lending to small farms (as a percentage of a bank's assets) tends to decrease as the bank increases in size. We believe that small farms are a category of small enterprises that have been under researched in the lending literature and that further study of these relationships would yield new and interesting results.

Keywords: Banks, loans, lending relationships, denovo banks, agriculture, farms

Suggested Citation

Akhavein, Jalal D. and Goldberg, Lawrence G. and White, Lawrence J., Relationship Lending and Denovo Banks: An Examination of Bank Lending to Small Farm Borrowers (January 2002). NYU Working Paper No. EC-02-04. Available at SSRN: https://ssrn.com/abstract=1292650

Jalal D. Akhavein

Fitch Ratings Inc. ( email )

One State Street Plaza
New York, NY 10004
United States

Lawrence G. Goldberg

University of Miami - Department of Finance

P.O. Box 248094
Coral Gables, FL 33124-6552
United States

Lawrence J. White

New York University (NYU) - Leonard N. Stern School of Business, Department of Economics ( email )

44 West 4th Street
Suite 9-160
New York, NY NY 10012
United States

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