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http://hdl.handle.net/10419/18320
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| Title: | | Relationship Banking and SMEs: A Theoretical Analysis  |
| Authors: | | Baas, Timo Schrooten, Mechthild |
| Issue Date: | | 2005 |
| Series/Report no.: | | DIW-Diskussionspapiere 469 |
| Abstract: | | Reliable information on small and medium sized enterprises (SMEs) is rare and costly for financial intermediaries. To compensate for this, relationship banking is often considered as the appropriate lending technique in the case of SMEs. In this paper we offer a theoretical model to analyze the pricing behavior of banks in a Bertrand competition framework with monitoring costs. We show that the lack of reliable information leads to comparably high interest rates even if a long-term relationship between borrower and bank exists. The paper offers a theoretical explanation why SME managers consider external finance as a major constraint to their business. (101 words) |
| Subjects: | | Relationship Banking Financial Constraints Small and Medium Sized Enterprises Accounting |
| JEL: | | G21 D82 D43 M41 |
| Document Type: | | Working Paper |
| Appears in Collections: | | Publikationen von Forscherinnen und Forschern des DIW DIW-Diskussionspapiere
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