Do Firm-Bank 'Odd Couples' Exacerbate Credit Rationing?
47 Pages Posted: 31 May 2011 Last revised: 10 Dec 2014
Date Written: September 1, 2014
This paper tests the impact of an imperfect firm-bank type match on firms' financial constraints using a dataset of about 4,500 Italian manufacturing firms. Considering an optimal match of opaque (transparent) borrowing firms with relational (transactional) lending main banks, the possibility arises of firm-bank "odd couples" where opaque firms end up matched with transactional main banks. We show that the probability of credit rationing increases when the mismatch between firms and banks widens. Our conjecture is that "odd couples" emerge either because of organizational changes in the credit market or since firms observe only imperfectly banks' lending technology.
Keywords: Relationship Banking, Credit Rationing and Asymmetric Information
JEL Classification: G21, D84
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