Bank Relationships and Firm Profitability

37 Pages Posted: 13 Apr 1999

See all articles by Hans Degryse

Hans Degryse

KU Leuven, Department Accounting, Finance and Insurance; Centre for Economic Policy Research (CEPR)

Steven Ongena

University of Zurich - Department of Banking and Finance; Swiss Finance Institute; KU Leuven; Centre for Economic Policy Research (CEPR)

Abstract

This paper examines how bank relationships affect firm performance. An empirical implication of recent theoretical models is that firms maintaining multiple bank relationships are less profitable than their single-bank peers. We investigate this empirical implication using a data set containing virtually all Norwegian publicly listed firms for the period 1979-1995. We find that sales profitability is substantially higher if firms maintain only a single bank relationship. Furthermore, we observe that firms switching a single bank relationship improve their sales profitability.

JEL Classification: G21, C41

Suggested Citation

Degryse, Hans and Ongena, Steven R. G., Bank Relationships and Firm Profitability. Available at SSRN: https://ssrn.com/abstract=157133 or http://dx.doi.org/10.2139/ssrn.157133

Hans Degryse (Contact Author)

KU Leuven, Department Accounting, Finance and Insurance ( email )

Naamsestraat 69
Leuven, B-3000
Belgium

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Steven R. G. Ongena

University of Zurich - Department of Banking and Finance ( email )

Schönberggasse 1
Zürich, 8001
Switzerland

Swiss Finance Institute

c/o University of Geneva
40, Bd du Pont-d'Arve
CH-1211 Geneva 4
Switzerland

KU Leuven ( email )

Oude Markt 13
Leuven, Vlaams-Brabant 3000
Belgium

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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