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Essays on the effects of banking relationships :

University of Minnesota,
Publication Date
  • Commercial Banks
  • Economics
  • Relationship Banking
  • Economics


Essay #1. Financially distressed firms, by definition, need funding to remain solvent. Repeated lending may provide banks information on the condition of a firm that is otherwise unobservable.In the case of financial distress, when the true state of the firm is difficult to discern, prior (relationship) lenders may have valuable insights. Essay #2. I analyze the same-day and long-term performance of distressed loan announcements. Consistent with prior studies, I find that firms announcing distressed loans experience significantly positive abnormal returns. I also find that the most severely distressed firms experience the economically largest abnormal returns. Further, financially distressed firms with relationship loans have higher abnormal returns than firms backed by new lenders; this discrepancy is economically largest for the most severely distressed firms

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