Banking relationships, firm-size heterogeneity and access to credit: Evidence from European firms

Abstract

Using detailed data on European manufacturing firms, this paper investigates the role of firm-bank relationships and lending technologies in firms’ access to credit during the 2007–2009 financial crisis. Empirical results show that firms’ credit availability improves when banking relationships are tighter and when banks adopt a relationship lending approach. The association between banking relationship characteristics and credit access is characterized by significant heterogeneity across firm size groups. Specifically, we find that relationship lending technologies, the recourse to multiple banking and a consolidated relationship with the main bank are particularly beneficial for the access to credit of informationally opaque small businesses.