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 |
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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 |