Family Firms, Soft Information and Bank Lending in a Financial Crisis

CSEF working paper no.357

33 Pages Posted: 5 Aug 2012 Last revised: 3 Nov 2016

See all articles by Leandro D'Aurizio

Leandro D'Aurizio

Bank of Italy

Tommaso Oliviero

CSEF - University of Naples Federico II - Department of Economic and Statistical Sciences; CSEF; CefES; MoFiR

Livio Romano

Confindustria

Date Written: March 1, 2013

Abstract

This paper studies how access to bank lending differed between family and non-family firms in the 2007-2009 financial crisis. The theoretical prediction is that family block-holders' incentive structure results in lower agency conflict in the borrower-lender relationship. Using highly detailed data on bank-firm relations, we exploit the reduction in bank lending in Italy following the crisis in October 2008. We find statistically and economically significant evidence that the contraction in credit for family firms was smaller than that for non-family firms. Results are robust to ex-ante observable differences between the two types of firms and to time-varying bank fixed effects. We further show that the difference in the amount of credit granted to family and non-family firms is related to an increased role for soft information in Italian banks' operations, following the Lehman Brothers' failure. Finally, by identifying a match between those banks and family firms, we can control for time-varying unobserved heterogeneity among the firms and validate the hypothesis that our results are supply driven.

Keywords: Family firms, Financial crisis, Soft information, Bank lending

JEL Classification: C81, D22, E44, G21, G32

Suggested Citation

D'Aurizio, Leandro and Oliviero, Tommaso and Romano, Livio, Family Firms, Soft Information and Bank Lending in a Financial Crisis (March 1, 2013). CSEF working paper no.357, Available at SSRN: https://ssrn.com/abstract=2123895 or http://dx.doi.org/10.2139/ssrn.2123895

Leandro D'Aurizio

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

Tommaso Oliviero

CSEF - University of Naples Federico II - Department of Economic and Statistical Sciences ( email )

Via Cintia 26
Napoli
Italy

CSEF ( email )

Via Cintia
Complesso Monte S. Angelo
Napoli, Naples 80126
Italy

CefES ( email )

U6 Building
Viale Piero e Alberto Pirelli, 22
Milano, 20126
Italy

MoFiR ( email )

Piazzale Martelli, 8
Ancona, 60100
Italy

Livio Romano (Contact Author)

Confindustria ( email )

Viale dell'astronomia 30
Rome, 00144
Italy
+39 065903657 (Phone)

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