Switching from Single to Multiple Bank Lending Relationships: Determinants and Implications

Posted: 29 May 2002

Multiple version iconThere are 2 versions of this paper


Our data show that nearly all firms borrow for the first time in their life from a single bank, but soon afterwards some of them start borrowing from additional banks. Duration analysis shows that the likelihood of a firm substituting a single relationship with multiple relationships increases with the duration of that relationship. It also shows that this substitution is more likely to occur for firms with more growth opportunities and for firms with poor performance. The analysis of the ex post effects of the initiation of multiple relationships, in turn, shows that firms with higher levels of investment prior to the initiation of multiple relationships increase their investment even further when they start to borrow from multiple banks, and that firms with poor prior performance continue to perform poorly afterwards. These results suggest that concerns with hold-up costs, together with an unwillingness by the incumbent bank to increase its exposure to a firm because of its past poor performance, are the key reasons for these firms to initiate an additional relationship this early in their life.

Keywords: Relationship lending, single relationships, multiple relationships

JEL Classification: G21, G32

Suggested Citation

Alcoforado Farinha, Maria Luísa and Santos, João A. C., Switching from Single to Multiple Bank Lending Relationships: Determinants and Implications. Journal of Financial Intermediation, Vol. 11, Pp. 124-151, 2002. Available at SSRN: https://ssrn.com/abstract=310340

Maria Luísa Alcoforado Farinha

Bank of Portugal ( email )

Av. Almirante Reis, 71
1150 Lisbon
351-21-3128350 (Phone)

João A. C. Santos (Contact Author)

Federal Reserve Bank of New York ( email )

33 Liberty Street
New York, NY 10045
United States
212-720-5583 (Phone)
212-720-8363 (Fax)


Here is the Coronavirus
related research on SSRN

Paper statistics

Abstract Views
PlumX Metrics