Refine
Has Fulltext
- no (2)
Document Type
- Article (2) (remove)
Language
- English (2)
Is part of the Bibliography
- yes (2)
Keywords
- accounting (2) (remove)
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.