Bolton, Patrick, Freixas, Xavier, Gambacorta, Leonardo, Mistrulli, Paolo Emilio, (2016), “Relationship and Transaction Lending in a Crisis”, The Review of Financial Studies, 7 Ιουνίου
We study how relationship lending and transaction lending vary over the business cycle. We develop a model in which relationship banks gather information on their borrowers, allowing them to provide loans to profitable firms during a crisis. Because of the services they provide, operating costs of relationship banks are higher than those of transaction banks. Relationship banks charge a higher intermediation spread in normal times, but offer continuation lending at more favourable terms than transaction banks to profitable firms in a crisis. Using credit register information for Italian banks before and after the Lehman Brothers’ default, we test the theoretical predictions of the model.
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