Bank-Firm Relations and the Role of Mutual Guarantee Institutions at the Peak of the Crisis

Posted: 22 Dec 2010 Last revised: 5 May 2012

See all articles by Francesca Bartoli

Francesca Bartoli

Assolombarda

Giovanni Ferri

LUMSA University

Pierluigi Murro

LUISS Guido Carli University - Department of Business and Management

Zeno Rotondi

UNICREDIT; LUISS Guido Carli University

Multiple version iconThere are 2 versions of this paper

Date Written: March 1, 2012

Abstract

We examine the role played by Mutual Guarantee Institutions (MGIs) in the lending policies undertaken by banks at the peak of the Great Crisis of 2007-2009. We address this issue by using a large database on Italian firms built from the credit files of UniCredit banking Group and focusing on small business. We provide an empirical analysis of the determinants of the probability that a borrowing firm will suffer financial tension and obtain two main innovative findings. First, we show that small firms supported by MGIs were less likely to experience financial tensions even at that time of utmost financial stress. Second, our empirical evidence shows that MGIs have played a signalling role beyond the simple provision of a collateral. This latter finding suggests that the information provided by MGIs turned out to be key for bank-firm relations as scoring and rating systems – being typically based on pro-cyclical indicators – had become less informative during the crisis.

Keywords: financial crisis, bank-firm relationships, asymmetric information, credit guarantee schemes, small business finance, peer monitoring

JEL Classification: D82, G21, G30

Suggested Citation

Bartoli, Francesca and Ferri, Giovanni and Murro, Pierluigi and Rotondi, Zeno, Bank-Firm Relations and the Role of Mutual Guarantee Institutions at the Peak of the Crisis (March 1, 2012). Journal of Financial Stability, Forthcoming. Available at SSRN: https://ssrn.com/abstract=1729655 or http://dx.doi.org/10.2139/ssrn.1729655

Francesca Bartoli

Assolombarda ( email )

via Pantano 9
Milano, Milano 20122
Italy

Giovanni Ferri

LUMSA University ( email )

Via della Traspontina
Roma, Rome 00192
Italy

HOME PAGE: http://www.lumsa.it/giovanni-ferri

Pierluigi Murro (Contact Author)

LUISS Guido Carli University - Department of Business and Management ( email )

Via Salvini, 3
Rome, 00198
Italy

Zeno Rotondi

UNICREDIT ( email )

VIA SPECCHI 16
ROME, 00186
Italy

HOME PAGE: http://docenti.luiss.it/rotondi

LUISS Guido Carli University ( email )

Via O. Tommasini 1
Rome, Roma 00100
Italy

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