The Impacts of Single Bank Relationship on Firm Performance (in Korean)

We examine the effects of banking relationship on firm performance. We focus on how single bank relationship can affect firm performance. Many studies, both theoretical and empirical, investigate the importance of banking relationship to firms by examining the influences of these relationships on firm performance. However, prior empirical results on how banking relationships affect firm performances are ambiguous. We investigates this empirical analysis using a data set containing virtually all Korean publicly listed firms for the period 2002-2006. We find a significantly negative relation between single bank relationship and firm performance. The close relationship between firms and banks in Korea may not improve the performance of listed firms. The hold up costs may be present in the single bank relationship of Korean listed firms over the part of 2002 to 2006. It implies that the costs arising from the single bank relationship may be substantial enough to erode firm performance. The exclusive bank-firm ties in the single bank relationship may adversely affect management decision making and firm performance.