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Relationship Banking and Firm Profitability

In: Studies On Financial Markets In East Asia

Author

Listed:
  • Shigeru Uchida

    (Faculty of Economics Nagasaki University, Japan)

  • Sarwar U. Ahmed

    (School of Business, Independent University, Bangladesh)

Abstract

Small and medium enterprises (SMEs) having less creditworthiness and reputation compared to bigger firms are in greater need of establishing long-term relationship with banks to ensure continued supply of funds. Accordingly, this study aims at summarizing the findings of the empirical analysis regarding the impact of relationship banking on the performance of SMEs of Japan. The findings of the analysis indicated that, having multiple banking relationships implies rather weak profitability status of a corporate firm. Although relationship banking leading towards corporate shareholding raises profitability of the SMEs, increased supply of credit conversely reduces the profits. But overall, relationship banking has positive impact on the profitability of SMEs while there are other reasons to explain the negative relationship between credit and profitability.

Suggested Citation

  • Shigeru Uchida & Sarwar U. Ahmed, 2011. "Relationship Banking and Firm Profitability," World Scientific Book Chapters, in: Masayuki Susai & Shigeru Uchida (ed.), Studies On Financial Markets In East Asia, chapter 4, pages 61-73, World Scientific Publishing Co. Pte. Ltd..
    • Handle: RePEc:wsi:wschap:9789814343374_0004
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