The Benefits of Lending Relationships: Evidence from Small Business Data

MITCHELL A. PETERSEN*, RAGHURAM G. RAJAN

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

1936 Scopus citations

Abstract

This paper empirically examines how ties between a firm and its creditors affect the availability and cost of funds to the firm. We analyze data collected in a survey of small firms by the Small Business Administration. The primary benefit of building close ties with an institutional creditor is that the availability of financing increases. We find smaller effects on the price of credit. Attempts to widen the circle of relationships by borrowing from multiple lenders increases the price and reduces the availability of credit. In sum, relationships are valuable and appear to operate more through quantities rather than prices. 1994 The American Finance Association

Original languageEnglish (US)
Pages (from-to)3-37
Number of pages35
JournalThe Journal of Finance
Volume49
Issue number1
DOIs
StatePublished - Mar 1994

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics

Fingerprint Dive into the research topics of 'The Benefits of Lending Relationships: Evidence from Small Business Data'. Together they form a unique fingerprint.

Cite this