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Do Firm-Bank ``Odd Couples'' Exacerbate Credit Rationing?

Author

Listed:
  • Giovanni Ferri

    (University of Bari)

  • Pierluigi Murro

    (LUISS University)

Abstract

This paper tests the impact of an imperfect bank-firm type match on firms' financial constraints using a dataset of about 4,500 Italian manufacturing firms. We start considering an optimal matching of opaque (transparent) borrowing firms with relational (transactional) lending main banks. Next we contemplate the possibility that firm-bank "odd couples" materialize where opaque (transparent) firms end up matched with transactional (relational) main banks. Our results show that more than 25% of the firms falls into an "odd couple". Moreover, we find that the probability of rationing is larger when firms and banks match in "odd couples". We conjecture the "odd couples" emerge either since the bank's lending technology is not perfectly observable to the firm or because riskier firms - even though opaque - strategically select transactional banks in the hope of being classified as lower risks.

Suggested Citation

  • Giovanni Ferri & Pierluigi Murro, 2012. "Do Firm-Bank ``Odd Couples'' Exacerbate Credit Rationing?," Working Papers CASMEF 1207, Dipartimento di Economia e Finanza, LUISS Guido Carli.
    • Handle: RePEc:lui:casmef:1207
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    More about this item

    Keywords

    Bank-firm Relationship; Asymmetric Information; Credit Rationing.;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General

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