Lending Relationships and Credit Rationing: The Impact of Securitization
30 Pages Posted: 16 Aug 2011
Date Written: August 16, 2011
Do lending relationships mitigate credit rationing? Does securitization influence the impact of lending relationships on credit rationing differently in normal periods versus crisis periods? This paper combines several unique data sets to address these questions. Employing a disequilibrium model to identify credit rationing, we find that more intense lending relationships, measured through their length and lower number, considerable improve credit supply and reduce the degree of credit rationing. In general, we find that a relationship with a bank being more involved in securitization activities relaxes credit constraints in normal periods; however, it also increases credit rationing during crisis periods. Finally, we study the impact of different types of securitization – covered bonds and MBS – on credit rationing. While both types of securitization reduce credit rationing in normal periods, the issuance of MBS by a firm’s main bank aggravates these firm’s credit rationing in crisis periods.
Keywords: lending relationships, financial crisis, securitization
JEL Classification: G21
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