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Please use this identifier to cite or link to this item:
http://hdl.handle.net/2451/27183
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| Title: | Relationship Lending and Lines of Credit in Small Firm Finance |
| Authors: | Berger, Allen N.
Udell, Gregory F. |
| Issue Date: | 1994 |
| Series/Report no.: | FIN-94-016 |
| Abstract: | This paper examines the role of relationship lending in small firm
finance. We examine price and nonprice terms of bank lines of credit
(L/C) extended to small firms. Our focus on bank L/Cs allows us toe
examine a type of loan contract in which the bank-borrower relationship
is likely to be an important mechanism for solving asymmetric
information problems associated with financing small enterprises. We
find that borrowers with longer banking relationships pay lower interest
rates and are less likely to pledge collateral. These results are
consistent with theoretical arguments that relationship lending
generates valuable information about borrower quality. |
| URI: | http://hdl.handle.net/2451/27183 |
| Appears in Collections: | Finance Working Papers
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