lending relationships in germany – empirical evidence …ftp.zew.de/pub/zew-docs/dp/dp2198.pdf ·...

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Lending relationships in Germany – Empirical evidence from survey data Dietmar Harho a,b,c , Timm K orting b, * a Wissenschaftszentrum Berlin (WZB), Reichpietschufer 50, 10785 Berlin, Germany b Zentrum f ur Europ aische Wirtschaftsforschung (ZEW), Postfach 103443, 68034 Mannheim, Germany c Centre for Economic Policy Research (CEPR), 90-98 Goswell Road, London EC1V 7OB, UK Abstract We examine empirically the role of lending relationships in determining the costs and collateral requirements for external funds. The data originate from a recently concluded survey of small and medium-sized German firms. In our descriptive analysis, we explore the borrowing patterns and the concentration of borrowing from financial institutions. Using data on L/C interest rates, collateral requirements, and the firm’s use of fast payment discounts we find that relationship variables may have some bearing on the price of external funds, but much more so on loan collateralization and availability. Firms in financial distress face comparatively high L/C interest rates and reduced credit availability. Ó 1998 Elsevier Science B.V. All rights reserved. JEL classification: G21; D45 Keywords: Lending relationships; Credit rationing; Financial intermediation 1. Introduction The relationships between firms and external financiers can be aected by a number of problems. Due to incompleteness of contracts and the intertemporal Journal of Banking & Finance 22 (1998) 1317–1353 * Corresponding author. Tel.: 49 621 1235 145; fax: 49 621 1235 223;; e-mail: [email protected] 0378-4266/98/$ – see front matter Ó 1998 Elsevier Science B.V. All rights reserved. PII: S 0 3 7 8 - 4 2 6 6 ( 9 8 ) 0 0 0 6 1 - 2

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Page 1: Lending relationships in Germany – Empirical evidence …ftp.zew.de/pub/zew-docs/dp/dp2198.pdf · Lending relationships in Germany – Empirical evidence from survey data ... Using
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