In this article we investigate the determining factors of bank monitoring in small business lending. Unlike previous studies that rely on proxies of a bank’s monitoring effort, we use a large and unique data set that includes the number of monitoring contacts per year between a European bank and a large number of small firms from 2009 to 2012. Our main results highlight that the frequency of a bank’s monitoring effort is negatively related to the firm’s reputation and the strength of the bank–firm relationship, and positively related to the bank–borrower proximity and the borrower’s credit risk level
MONITORING IN SMALL BUSINESS LENDING: HOW TO OBSERVE THE UNOBSERVABLE
SAMPAGNARO, GABRIELE;VERDOLIVA, VINCENZO
2015-01-01
Abstract
In this article we investigate the determining factors of bank monitoring in small business lending. Unlike previous studies that rely on proxies of a bank’s monitoring effort, we use a large and unique data set that includes the number of monitoring contacts per year between a European bank and a large number of small firms from 2009 to 2012. Our main results highlight that the frequency of a bank’s monitoring effort is negatively related to the firm’s reputation and the strength of the bank–firm relationship, and positively related to the bank–borrower proximity and the borrower’s credit risk levelFile in questo prodotto:
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