Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/320009 
Year of Publication: 
2020
Series/Report no.: 
CASMEF Working Paper Series No. WP 2020/03
Publisher: 
LUISS Guido Carli, Department of Economics and Finance, Arcelli Centre for Monetary and Financial Studies, Rome
Abstract: 
Credit frequently flows to the business sector through information-intensive bank-firm relationships. This paper studies the impact of relationship banking on firm entry. Exploiting Italian data, we document that relationship-oriented local credit markets feature lower entry, larger size at entry, and relatively more spin-offs than de novo entrepreneurs' entries. Information spillovers from credit relationships to entrants contribute to these effects. A dynamic general equilibrium model calibrated to the Italian data can match these effects when information spillovers are allowed for. Relationship banks' information on incumbents is transferable to incumbents' spin-offs but crowds out information acquisition on de novo entrants. The buildup of incumbents' business wealth during credit relationships can outweigh the aggregate output effect of reduced entry.
Subjects: 
Credit Relationships
Firm Entry
Information Spillovers
Spin-offs
JEL: 
E44
G21
O16
Document Type: 
Working Paper

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