Abstract
ABSTRACT This paper empirically examines how ties between a firm and its creditors affect the availability and cost of funds to the firm. We analyze data collected in a survey of small firms by the Small Business Administration. The primary benefit of building close ties with an institutional creditor is that the availability of financing increases. We find smaller effects on the price of credit. Attempts to widen the circle of relationships by borrowing from multiple lenders increases the price and reduces the availability of credit. In sum, relationships are valuable and appear to operate more through quantities rather than prices.
Keywords
CreditorBusinessMonetary economicsSmall businessStrong tiesSurvey data collectionAffect (linguistics)FinanceFinancial systemEconomicsInterpersonal tiesDebt
Related Publications
Protection of minority interest and the development of security markets
While excessive regulation is an obstacle to the development of financial markets, we argue that lack of basic rules or poorly enforced regulation may explain the relative impor...
Banks and Corporate Control in Japan
Using a large sample of Japanese firm level data, we find that Japanese banks act primarily in the short term interests of creditors when dealing with firms outside bank groups....
Law and Finance
This paper examines legal rules covering protection of corporate shareholders and creditors, the origin of these rules, and the quality of their enforcement in 49 countries. The...
Agency costs of free cash flow, corporate finance, and takeovers
Corporate managers are the agents of shareholders; a relationship fraught with conflicting interests. Agency theory, the analysis of such conflicts, is now a major part of the e...
Social funds as a strategy for poverty reduction in Jamaica : an exploratory study
This study explored the relationship between social fund projects and poverty reduction in selected communities in Jamaica. The Caribbean nation's social fund projects aim to re...
Publication Info
- Year
- 1994
- Type
- article
- Volume
- 49
- Issue
- 1
- Pages
- 3-37
- Citations
- 5169
- Access
- Closed
External Links
Social Impact
Altmetric
PlumX Metrics
Social media, news, blog, policy document mentions
Citation Metrics
5169
OpenAlex
Cite This
Mitchell A. Petersen,
Raghuram G. Rajan
(1994).
The Benefits of Lending Relationships: Evidence from Small Business Data.
The Journal of Finance
, 49
(1)
, 3-37.
https://doi.org/10.1111/j.1540-6261.1994.tb04418.x
Identifiers
- DOI
- 10.1111/j.1540-6261.1994.tb04418.x