Relationship banking and SMEs: A theoretical analysis
- Reliable information on small- and medium-sized enterprises (SMEs) is rare and costly for financial intermediaries. Therefore relationship banking is often considered as the appropriate lending technique. In this paper we offer a theoretical model to analyze relationship banking and the pricing behavior of banks in a Bertrand competition framework with monitoring costs. We show that the lack of reliable information leads to comparable high interest rates even if a long-term relationship between borrower and bank exists. The paper offers a theoretical explanation why SMEs often are faced with borrowing constraints.
| Author details: | Timo BaasORCiDGND, Mechthild SchrootenORCiDGND |
|---|---|
| DOI: | https://doi.org/10.1007/s11187-006-0018-7 |
| ISSN: | 0921-898X |
| Title of parent work (English): | Small business economics : an international journal |
| Publisher: | Springer |
| Place of publishing: | Dordrecht |
| Publication type: | Article |
| Language: | English |
| Year of first publication: | 2006 |
| Publication year: | 2006 |
| Release date: | 2020/06/02 |
| Tag: | accounting; financial constraints; relationship banking; small and medium sized enterprises |
| Volume: | 27 |
| Number of pages: | 11 |
| First page: | 127 |
| Last Page: | 137 |
| Organizational units: | Wirtschafts- und Sozialwissenschaftliche Fakultät / Wirtschaftswissenschaften |
| Peer review: | Referiert |
| Publishing method: | Open Access |
| Open Access / Green Open-Access |
