Contents

Banks' lending decisions after loan acquisitions: do banks favour pre-existing relationships?

Sohn, Wook / Choi, Hyosoon

Abstract

This article examines the lending decisions of Korean banks after they acquire loan portfolios from failed banks. We find that a firm's preexisting relationships positively affect the continuation of those relationships, and that pre-existing relationships negatively impact increases in loan size, once those relationships are maintained. These results suggest that banks have a conflict of interest that comes with pre-existing lending relationships, and that bank quality does not necessarily convey the risk classes of its client firms.

Issue Date
2011-04
Publisher
Routledge
Keywords Plus
SMALL BUSINESS DATA; CREDIT; INFORMATION; GERMANY; COST
DOI
10.1080/00036840802600202
Journal Title
Applied Economics
Start Page
1099
End Page
1112
ISSN
0003-6846
Language
English
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