Anderson, Gareth;
Bahaj, Saleem;
Chavaz, Matthieu;
Foulis, Angus;
Pinter, Gabor;
(2023)
Lending Relationships and the Collateral Channel.
Review of Finance
, 27
(3)
pp. 851-887.
10.1093/rof/rfac041.
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Abstract
This article shows that lending relationships insulate corporate investment from fluctuations in collateral values. The sensitivity of corporate investment to changes in real-estate collateral values is halved when the length of relationship between a bank and a firm, or its board of directors, doubles. Long relationships with board members dominate relationships with the firm in dampening the collateral channel. Moreover, lending relationships with directors in their personal capacity insulate corporate investment over and above corporate relationships. Our findings support theories where collateral and private information are substitutes in mitigating credit frictions over the cycle and show that lending relationships are more multi-faceted than previously thought.
| Type: | Article |
|---|---|
| Title: | Lending Relationships and the Collateral Channel |
| Open access status: | An open access version is available from UCL Discovery |
| DOI: | 10.1093/rof/rfac041 |
| Publisher version: | https://doi.org/10.1093/rof/rfac041 |
| Language: | English |
| Additional information: | This version is the author-accepted manuscript. For information on re-use, please refer to the publisher’s terms and conditions. |
| Keywords: | Investment; Capital; Intangible Capital; Capacity, Business Fluctuations; Cycles, Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill |
| UCL classification: | UCL UCL > Provost and Vice Provost Offices > UCL BEAMS UCL > Provost and Vice Provost Offices > UCL BEAMS > Faculty of Engineering Science UCL > Provost and Vice Provost Offices > UCL BEAMS > Faculty of Engineering Science > UCL School of Management |
| URI: | https://discovery-pp.ucl.ac.uk/id/eprint/10187726 |
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