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On the Profitability and Cost of Relationship Lending
Abstract
We provide evidence on the costs and profitability of relationship lending by banks. We derive bank-specific measures of loan rate smoothing for small business borrowers in response to exogenous shocks to their credit risk and to interest rates, and then estimate cost and profit functions to examine how smoothing affects bank costs and profits. Our results suggests that, in general, loan rate smoothing in response to a credit risk shock is not...
Paper Details
Title
On the Profitability and Cost of Relationship Lending
Published Date
Jan 1, 1998
Journal
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