Time for a change:loan conditions and bank behavior when firms switch banks

Ioannidou, Vasso and Ongena, Steven (2010) Time for a change:loan conditions and bank behavior when firms switch banks. Journal of Finance, 65 (5). 1847–1877. ISSN 0022-1082

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Abstract

This paper studies loan conditions when firms switch banks. Recent theoretical work on bank–firm relationships motivates our matching models. The dynamic cycle of the loan rate that we uncover is as follows: a loan granted by a new (outside) bank carries a loan rate that is significantly lower than the rates on comparable new loans from the firm's current (inside) banks. The new bank initially decreases the loan rate further but eventually ratchets it up sharply. Other loan conditions follow a similar economically relevant pattern. This bank strategy is consistent with the existence of hold-up costs in bank–firm relationships.

Item Type:
Journal Article
Journal or Publication Title:
Journal of Finance
Uncontrolled Keywords:
/dk/atira/pure/subjectarea/asjc/1400/1402
Subjects:
ID Code:
64508
Deposited By:
Deposited On:
15 May 2013 08:24
Refereed?:
Yes
Published?:
Published
Last Modified:
08 Jul 2020 03:39