Relationship Lending and Denovo Banks: An Examination of Bank Lending to Small Farm Borrowers

NYU Salomon Center Working Paper No. S-02-6

29 Pages Posted: 24 Jul 2002

See all articles by Jalal D. Akhavein

Jalal D. Akhavein

Fitch Ratings Inc.

Lawrence G. Goldberg

University of Miami - Department of Finance

Lawrence J. White

Stern School of Business, New York University; New York University (NYU) - Leonard N. Stern School of Business, Department of Economics

Multiple version iconThere are 2 versions of this paper

Date Written: January 2002

Abstract

In this paper we examine the lending by small banks to small farms. We find that relationships, as measured by the length of tenure of farm operators, are positively related to bank lending. We also find that denovo banks have a positive tendency to lend to small farms, similar to the tendency of denovo banks to lend to small businesses generally. When existing relationships between borrowers and incumbent lenders are stronger, however, denovo banks have greater difficulties in lending to small farms. Finally, we find that, even within the category of small banks, lending to small farms (as a percentage of a bank's assets) tends to decrease as the bank increases in size. We believe that small farms are a category of small enterprises that have been under-researched in the lending literature and that further study of these relationships would yield new and interesting results.

Keywords: Banks, loans, lending relationships, denovo banks, agriculture, farms

JEL Classification: G21, Q14

Suggested Citation

Akhavein, Jalal D. and Goldberg, Lawrence G. and White, Lawrence J. and White, Lawrence J., Relationship Lending and Denovo Banks: An Examination of Bank Lending to Small Farm Borrowers (January 2002). NYU Salomon Center Working Paper No. S-02-6, Available at SSRN: https://ssrn.com/abstract=303310 or http://dx.doi.org/10.2139/ssrn.303310

Jalal D. Akhavein (Contact Author)

Fitch Ratings Inc. ( email )

One State Street Plaza
New York, NY 10004
United States

Lawrence G. Goldberg

University of Miami - Department of Finance

P.O. Box 248094
Coral Gables, FL 33124-6552
United States

Lawrence J. White

Stern School of Business, New York University ( email )

44 West 4th Street
New York, NY 10012
United States
212-998-0880 (Phone)
212-995-4218 (Fax)

New York University (NYU) - Leonard N. Stern School of Business, Department of Economics ( email )

44 West 4th Street
Suite 9-160
New York, NY NY 10012
United States

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