The Profitability of Bank-Borrower Relationships
Posted: 27 Sep 2004
This paper investigates the profitability of relationship banking within the context of small business loans made by community banks. Theory implies that competition reduces the benefits of bank-borrower relationships, making relationship loans more risky and less profitable. I present evidence for community banks that is consonant with this implication.
Keywords: relationship lending, small business lending, community banks
JEL Classification: G21, G28
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