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
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: Suggested Citation