The Effects of Bank-Firm Relationship Length on Firms' Growth in Marche Region
Economia Marche - Review of Regional Studies, Vol. 1, pp. 63-80, 2008
Posted: 7 Feb 2009 Last revised: 24 Nov 2009
Date Written: March 3, 2008
Abstract
In this paper we empirically explore the effect of relationship banking on firms' employment growth. Theoretical literature explains both potential benefits and costs of close credit relationships, while empirical literature provides controversial results depending on the proxies used to measure relationship banking and the financial environment. Using survey data concerning micro, small and medium enterprises located in Marche Region in the period 2002-2004 we model firms' employment growth with the intensity of credit relationships, as proxied by the duration of bank-firm customer relationships. We find heterogeneous results by firm dimension as the negative impact that the length of the credit relationship has on the growth rate of employment for the overall sample can actually be broken down into a significant and negative effect on micro and small firms' growth and a not significant effect on medium size firms' growth. Our result are broadly consistent with those achieved by Gambini and Zazzaro (2008), that run a similar analysis on a larger panel dataset of small and medium enterprises at the national level.
Keywords: relationship banking, firm growth, duration of credit relationship
JEL Classification: G21, G34
Suggested Citation: Suggested Citation