Nowhere else to go: Determinants of bank-firm relationship discontinuations after bank mergers

Article Business, Finance

Bank switching of US small businesses: new methods and evidence

Song Zhang et al.

Summary: Despite being opaque, small firms often switch from primary financial institutions to transactional lenders. The switching decision is less likely when the primary financial institution is a nearby bank associated with quality services and connected to the firm via other relationships. Small firms become more loyal as they grow and seek nonmortgage credit. Outside the primary relationship, loan approval and borrowing costs are negatively affected, but loan maturities are longer.

REVIEW OF QUANTITATIVE FINANCE AND ACCOUNTING (2022)

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Article Business, Finance

Collateral and asymmetric information in lending markets *

Vasso Ioannidou et al.

Summary: This study examines the costs and benefits of collateral requirements in bank lending markets characterized by asymmetric information. By utilizing credit registry data, the authors estimate a structural model to analyze firms' credit demand, banks' contract offering and pricing, and firm default. They find evidence that collateral helps mitigate adverse selection and moral hazard. Counterfactual experiments are conducted to quantify the propagation of adverse shocks to collateral values on credit supply, allocation, interest rates, default, and bank profits, highlighting the relative importance of pricing and rationing strategies employed by banks in response to such shocks.

JOURNAL OF FINANCIAL ECONOMICS (2022)

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Article Business, Finance

Sorry, We're Closed Bank Branch Closures, Loan Pricing, and Information Asymmetries

Diana Bonfim et al.

Summary: The study shows that even in competitive local markets, the closing of bank branches affects loan conditions for firms. While firms intentionally switching banks receive a discount, those quickly transferring to other banks do not. However, the latter group has a lower loan default rate and suggests higher quality compared to the former group.

REVIEW OF FINANCE (2021)

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Article Business, Finance