Relationship Banking during the Financial Crisis As of Mid-2007: Distinguishing between Affected and Unaffected Banks

36 Pages Posted: 3 Jan 2019

See all articles by Leonie Decrinis

Leonie Decrinis

United Nations - Industrial Development Organization (UNIDO)

Date Written: March 28, 2017

Abstract

This paper analyses the role of relationship banking during the financial crisis in Germany. On the basis of 4504 German firms, I investigate empirically how close and long-lasting relationships between banks and firm clients helped to mitigate a potential credit rationing at that time. I presume that financial institutions, which were affected by the crisis particularly reduced their credit supply. Moreover, I hypothesize that firms were most concerned by this contraction when they had several affected banking partners. The results of the investigation confirm the proposed hypotheses in general, an exception however are industrial companies. Overall, it can be stated that close banking relationships are beneficial in times of crises however they may have disadvantages when economic conditions are stable. My results also suggest that a solid equity ratio especially helped industrial firms to mitigate credit rationing during the crisis. Average capitalization levels, have increased for all firms since 2007.

Keywords: Relationship Banking, Global Financial Crisis

JEL Classification: E2

Suggested Citation

Decrinis, Leonie, Relationship Banking during the Financial Crisis As of Mid-2007: Distinguishing between Affected and Unaffected Banks (March 28, 2017). Available at SSRN: https://ssrn.com/abstract=3300810 or http://dx.doi.org/10.2139/ssrn.3300810

Leonie Decrinis (Contact Author)

United Nations - Industrial Development Organization (UNIDO) ( email )

Wagramer Str. 5
Vienna, 1220
Austria

Register to save articles to
your library

Register

Paper statistics

Downloads
6
Abstract Views
89
PlumX Metrics