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Identification of Relationship Lending in Bank-Borrower Networks

Author

Listed:
  • Yoshitaka Ogisu

    (Faculty of Economics, Konan University and Junior Research Fellow, Research Institute for Economics and Business Administration, Kobe University, JAPAN)

  • Shoka Hayaki

    (Faculty of Economics, Kagawa University and Research Institute for Economics and Business Administration, Kobe University, JAPAN)

  • Masahiko Shibamoto

    (Research Institute for Economics and Business Administration and Center for Computational Social Science, Kobe University, JAPAN)

Abstract

Relationship lending refers to lending a close relationship between a bank and a borrower, which is expected to help reduce borrowing costs. However, the extent to which they are used is unclear. This measurement difficulty makes it challenging to evaluate its benefits accurately. This paper proposes a novel empirical framework to identify relationship lending in transaction data between banks and borrowers in a more objective manner by determining the set of significant ties from an ensemble of undirected and unweighted bipartite networks. Using the detected relationship lending between banks and borrowers, we estimate the magnitude of additional lending volumes based on relationship lending. From the financial data in Japan from 1977 to 2021, the usage of relationship lending is estimated to be over 50% throughout the sample period but has varied considerably over time. We find that the volume of relationship lending is 34% larger than that of transactional lending. Although the relative volume of relationship lending against transaction lending has been declining, the importance of relationship lending remains substantial in obtaining a larger volume of lending.

Suggested Citation

  • Yoshitaka Ogisu & Shoka Hayaki & Masahiko Shibamoto, 2025. "Identification of Relationship Lending in Bank-Borrower Networks," Discussion Paper Series DP2025-02, Research Institute for Economics & Business Administration, Kobe University.
    • Handle: RePEc:kob:dpaper:dp2025-02
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    File URL: https://www.rieb.kobe-u.ac.jp/academic/ra/dp/English/DP2025-02.pdf
    File Function: First version, 2025
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    More about this item

    Keywords

    Relationship lending; Bank-borrower networks; Significant ties;
    All these keywords.

    JEL classification:

    • C81 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Methodology for Collecting, Estimating, and Organizing Microeconomic Data; Data Access
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation

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