The Influence of Communication Richness, Self-Interest, and Relational Trust on Banks’ Knowledge About Firms Within the Small-Cap Debt Finance Markets

Abstract

Knowledge about small firmspsila circumstances in the debt finance markets is unevenly dispersed. Since efficient debt markets depend upon bankspsila adequate knowledge to make investment decisions, the mechanisms by which knowledge is transferred become particularly salient. Using information richness and structural embeddedness theories, we examined knowledge transfer within this context. We used survey data from 914 firms and found a positive association between firmspsila use of rich communication modes with the bank and a bankspsila knowledge about the firm. We unexpectedly found no significant relationship between firmspsila assumptions of aligned self-interest and knowledge transfer to banks but did find a strong positive association between firmspsila relational trust in banks and knowledge transfer. We also found that as communication forms become richer, self-interest becomes positively associated with knowledge transfer while and relational trust has a weaker positive association with knowledge transfer.