The Benefits of Bank Firm Relationships When Credit is Unconstrained: The Case of French SMEs
28 Pages Posted: 10 Jun 2015
Date Written: April 22, 2015
According to Kremp and Sevestre (2013), French firms did not suffer from credit restriction during the period 2004-2010. This study seeks to identify the benefits of bank-firm relationships when credit is unconstrained. By using a unique set of data collected from a French relationship bank (CMNE), covering the period 1996-2009, the study shows that, depending on the health of the economy, the benefits of bank-firm relationships may take the form of a weaker credit spread. The results are complementary with those of Sharpe (1990); they indicate that weaker interest rates appear only in normal periods, and hold up is a problem only during economic recessions.
Keywords: banks, business cycle, relationship lending, small business
JEL Classification: G21
Suggested Citation: Suggested Citation