Bank Capital and Lending Relationships

Journal of Finance, Forthcoming

Fisher College of Business Working Paper No. 2016-03-17

Charles A. Dice Center Working Paper No. 2016-17

63 Pages Posted: 15 Nov 2015 Last revised: 11 Apr 2017

See all articles by Michael Schwert

Michael Schwert

University of Pennsylvania - The Wharton School

Date Written: February 7, 2017

Abstract

This paper investigates the mechanisms behind the matching of banks and firms in the loan market and the implications of this matching for lending relationships, bank capital, and the provision of credit. I find that bank-dependent firms borrow from well capitalized banks, while firms with access to the bond market borrow from banks with less capital. This matching of bank-dependent firms with stable banks smooths cyclicality in aggregate credit provision and mitigates the effects of bank shocks on the real economy.

Keywords: banks, bank capital, lending relationships, syndicated loans

JEL Classification: G21, G32

Suggested Citation

Schwert, Michael, Bank Capital and Lending Relationships (February 7, 2017). Journal of Finance, Forthcoming; Fisher College of Business Working Paper No. 2016-03-17; Charles A. Dice Center Working Paper No. 2016-17. Available at SSRN: https://ssrn.com/abstract=2690490 or http://dx.doi.org/10.2139/ssrn.2690490

Michael Schwert (Contact Author)

University of Pennsylvania - The Wharton School ( email )

3641 Locust Walk
Philadelphia, PA 19104-6365
United States

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