The Real Effects of Bank-Firm Relationships
41 Pages Posted: 15 Nov 2018
Date Written: October 31, 2018
We investigate whether and how bank relationships affect real economic activity. We base our analysis on matched credit and labor data from Brazilian firms during 2005-2014. We document that firms with more bank relationships employ more workers and pay higher wages. Moreover, increases (decreases) of bank relationships result in higher (lower) economic activity. These effects are independent of firm size and due (but not limited) to higher credit availability and lower cost of credit. Importantly, the firm-level results consistently translate into positive macroeconomic effects at the municipality and state level. The evidence suggests positive real effects of multiple bank relationships.
Keywords: bank relationships, credit registry data, real effects, employment, wages
JEL Classification: G21, J21, O10
Suggested Citation: Suggested Citation