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Lending relationships and credit rationing : the impact of securitization

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  • Carbo Valverde, S.
  • Degryse, H.A.

    (Tilburg University, Center For Economic Research)

  • Rodriguez-Fernandez, F.

Abstract

Banks have been heavily involved in securitization. We study whether the involvedness of a firm?s main bank into different types of securitization activity -- asset backed securities (ABS) and covered bonds -- influences credit supply before and during the 2007-8 financial crisis. Both types of securitization allow the bank to generate liquidity. To the extent that ABS activity lowers lending standards in normal times, banks with more ABS activity may reduce their lending more in crisis times as an ex-post effect of a previously higher risk adoption. Employing a disequilibrium model to identify credit rationing, we find that a longer relationship with a firm?s main bank considerable improve credit supply. In general, we find that a relationship with a bank that is more involved in securitization activities relaxes credit constraints in normal periods. In contrast, while a relationship with a firm?s main bank that issues covered bonds reduces credit rationing during crisis periods, the issuance of asset backed securities by a firm?s main bank aggravates these firm?s credit rationing in crisis periods.
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Suggested Citation

  • Carbo Valverde, S. & Degryse, H.A. & Rodriguez-Fernandez, F., 2011. "Lending relationships and credit rationing : the impact of securitization," Discussion Paper 2011-128, Tilburg University, Center for Economic Research.
    • Handle: RePEc:tiu:tiucen:e23b55d1-433f-47fd-a8a3-e08854f17aa6
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    Cited by:

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    2. Tobias Berg & Daniel Streitz & Michael Wedow, 2015. "Real Effects of Securitization," BAFFI CAREFIN Working Papers 1514, BAFFI CAREFIN, Centre for Applied Research on International Markets Banking Finance and Regulation, Universita' Bocconi, Milano, Italy.
    3. Emanuele Brancati, 2013. "The Real Side of the Financial Crisis: Banks' Exposure, Flight to Quality and Firms' Investment Rate," CEIS Research Paper 302, Tor Vergata University, CEIS, revised 20 Mar 2014.
    4. Naim Spahiu & Halim Bajraktari & Florin Lata, 2017. "Ownership of Copyright in Works Created During Employment Relationships," European Journal of Economics and Business Studies Articles, Revistia Research and Publishing, vol. 3, ejes_v3_i.
    5. Agostino, Mariarosaria & Errico, Lucia & Rondinella, Sandro & Trivieri, Francesco, 2023. "Enduring lending relationships and european firms default," Research in Economics, Elsevier, vol. 77(4), pages 459-477.
    6. Andrea F. Presbitero & Gregory F. Udell & Alberto Zazzaro, 2014. "The Home Bias and the Credit Crunch: A Regional Perspective," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 46(s1), pages 53-85, February.
    7. Yu Zhang & Xiong Xiong & Wei Zhang & Xuefeng Liu, 2018. "Credit Rationing and the Simulation of Multi-bank Credit Market Model: A Computational Economics Approach," Computational Economics, Springer;Society for Computational Economics, vol. 52(4), pages 1233-1256, December.
    8. Brancati, Emanuele, 2013. "Innovation activity and nancing constraints: evidence from Italy during the crises," MPRA Paper 47750, University Library of Munich, Germany.
    9. Gärtner, Stefan & Fernández, Jorge, 2018. "The banking systems of Germany, the UK and Spain form a spatial perspective: The Spanish case," IAT Discussion Papers 18/02, Institut Arbeit und Technik (IAT), Westfälische Hochschule, University of Applied Sciences.
    10. Anna Białek-Jaworska & Natalia Nehrebecka, 2016. "The role of bank credit in business financing in Poland," Working Papers 2016-03, Faculty of Economic Sciences, University of Warsaw.
    11. Natalia Nehrebecka & Aneta Dzik-Walczak, 2016. "Publication selection bias in the sources of financing the enterprises research? A Meta-Regression Analysis," Working Papers 2016-02, Faculty of Economic Sciences, University of Warsaw.

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    More about this item

    Keywords

    lending relationships; financial crisis; securitization;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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