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Which Loans are Relationship Loans? Evidence from the 1998 Survey of Small Business Finances

Author

Listed:
  • Karlyn Mitchell

    (North Carolina State University)

  • Douglas K. Pearce

    (North Carolina State University)

Abstract

Despite financial economists' long-standing interest in the role of lender-borrower relationships in increasing the availability of funds to small businesses, many questions remain unanswered. Numerous empirical studies investigate the effect of relationships on the availability and terms of credit to small businesses (Petersen and Rajan (1994), Berger and Udell (1995), Blackwell and Winters (1997), Cole (1998), Harhoff and Körting (1998), Elsas and Krahnen (1998), Angelini et al.(1998), Degryse and van Cayseele (2000), Bodenhorn (2003)) and many find that relationships improve the availability of credit for some categories of small businesses. But the studies present mixed results on how relationships affect collateral requirements and lending rates, as well as whether relationships affect loan terms and availability via reputation enhancement, as modeled by Diamond (1991) and Boot and Thakor (1994), or via information capture, as modeled by Greenbaum et al. (1989) and Sharpe (1990).

Suggested Citation

  • Karlyn Mitchell & Douglas K. Pearce, 2004. "Which Loans are Relationship Loans? Evidence from the 1998 Survey of Small Business Finances," Journal of Entrepreneurial Finance, Pepperdine University, Graziadio School of Business and Management, vol. 9(2), pages 1-36, Summer.
    • Handle: RePEc:pep:journl:v:9:y:2004:i:2:p:1-36
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Bank; Loan; Lending; Relationship Loans; Relationship Lending; Small Business;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • M13 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - New Firms; Startups
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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