Relationship Lending, Accounting Disclosure, and Credit Availability During the Asian Financial Crisis

FDIC Center For Financial Research Working Paper No. 2005-08

Robert H. Smith School Research Paper No. RHS 06-022

53 Pages Posted: 8 Aug 2005 Last revised: 1 Sep 2014

See all articles by Wenying Jiangli

Wenying Jiangli

U.S. Federal Deposit Insurance Corporation (FDIC)

Haluk Unal

University of Maryland - Robert H. Smith School of Business

Chiwon Yom

Federal Deposit Insurance Corporation (FDIC)

Date Written: September 1, 2006

Abstract

In this paper we examine whether the intensity of banking relationships, measured by the number of banks with which a firm does business, benefits firms by making credit more available during periods of financial stress. We model credit availability to be determined jointly with the decision to post collateral and with the firm's choice of the number of lending relationships. Our main finding is that relationship banking increased the likelihood of obtaining credit during the Asian crisis for Korean and Thai firms. In contrast, we observe no significant association between relationship banking and credit availability for Indonesian and Philippine firms. We consider accounting disclosure a possible alternative factor that can explain the observed country differences. Our results show that except for Indonesia, audited financial information and accounting disclosure have no material impact on banks' credit decisions.

Keywords: relationship lending, accounting disclosure, credit availability

JEL Classification: G20, G21, G28

Suggested Citation

Jiangli, Wenying and Unal, Haluk and Yom, Chiwon, Relationship Lending, Accounting Disclosure, and Credit Availability During the Asian Financial Crisis (September 1, 2006). FDIC Center For Financial Research Working Paper No. 2005-08, Robert H. Smith School Research Paper No. RHS 06-022, Available at SSRN: https://ssrn.com/abstract=770346 or http://dx.doi.org/10.2139/ssrn.770346

Wenying Jiangli (Contact Author)

U.S. Federal Deposit Insurance Corporation (FDIC) ( email )

Washington, DC 20429
United States

Haluk Unal

University of Maryland - Robert H. Smith School of Business ( email )

College Park, MD 20742-1815
United States
301-405-2256 (Phone)
301-405 0359 (Fax)

Chiwon Yom

Federal Deposit Insurance Corporation (FDIC) ( email )

Washington, DC 20429
United States

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