Journal of Financial Services Research

, Volume 33, Issue 2, pp 101–126

Concentration of Banking Relationships in Switzerland: The Result of Firm Structure or Banking Market Structure?

  • Doris Neuberger
  • Maurice Pedergnana
  • Solvig Räthke-Döppner
Article

Abstract

Switzerland is one of the countries with the highest concentration of bank–customer relationships. The present paper seeks to find out whether this can be explained by the structure of Swiss firms or by the organization of the Swiss banking market. Using survey data from small and medium-sized enterprises in 1996 and 2002, we examine the influence of firm-, loan-, and bank-specific variables on the number of banking relationships. We find that firm and industry structure have the largest explanatory power, while banking market structure and conduct play a minor role. Relationship lending by state-owned cantonal banks and small regional banks tends to enhance the concentration of banking relationships.

Keywords

Relationship lending multiple bank relationships banking market structure small business finance 

References

  1. Agarwal S, Hauswald R (2006) Distance and information asymmetries in lending decisions. Paper presented at the Conference ‘Financial System Modernisation and Economic Growth in Europe’, Berlin, SeptemberGoogle Scholar
  2. Akhavein J, Goldberg LG, White LJ (2004) Small banks, small business, and relationships: an empirical study of lending to small farms. J Financ Serv Res 26:245–261CrossRefGoogle Scholar
  3. Angelini P, Di Salvo R, Ferri G (1998) Availability and cost of credit for small businesses: customer relationships and credit cooperatives. J Bank Financ 22:925–954CrossRefGoogle Scholar
  4. Audretsch DB, Elston JA (2002) Does firm size matter? Evidence on the impact of liquidity constraints on firm investment behavior in Germany. International Journal of Industrial Organization 20:1–17CrossRefGoogle Scholar
  5. BADAC (2005) T11.11a, Ständige Wohnbevölkerung 1995–2004. 2002 IDHEAP, update 21.11. http://www.badac.ch
  6. Bannier CE (2005) Heterogeneous multiple bank financing, optimal business risk and information disclosure. Working Paper Series Finance and Accounting no. 148, Goethe University Frankfurt, MarchGoogle Scholar
  7. Berger AN, Udell GF (1995) Relationship lending and lines of credit in small firm finance. J Bus 68:351–381CrossRefGoogle Scholar
  8. Berger AN, Udell GF (2002) Small business credit availability and relationship lending: the importance of bank organisational structure. Econ J 112:F32–F53CrossRefGoogle Scholar
  9. Berger AN, Udell GF (2003) The future of relationship lending. In: Berger AN, Udell GF (eds) The Future of Banking. WestportGoogle Scholar
  10. Berger AN, Udell GF (2006) A more complete conceptual framework for SME finance. J Bank Financ 30:2945–2966, (November)CrossRefGoogle Scholar
  11. Berger AN, Klapper LF, Udell GF (2001) The ability of banks to lend to informationally opaque small businesses. Journal of Banking and Finance 25:2127–2167CrossRefGoogle Scholar
  12. Berger AN, Klapper LF, Soledad Martinez Peria M, Zaidi R (2005) The effects of bank ownership type on banking relationships and multiple banking in developing economies detailed evidence from India. Board of Governors of the Federal Reserve System, Washington, DCGoogle Scholar
  13. Berglöf E, Sjögren H (1998) Combining arm’s length and control oriented finance—evidence from main bank relationships in sweden. In: Hopt KJ, Kanda H, Roe MJ (eds) Comparative corporate governance: the state of the art and emerging research. Clarendon, Oxford, pp 787–808Google Scholar
  14. Bichsel R (2006) State-owned banks as competition enhancers, or the grand illusion. J Financ Serv Res 30:117–150CrossRefGoogle Scholar
  15. Bolton P, Scharfstein DS (1996) Optimal debt structure and the number of creditors. J Polit Econ 104:1–25CrossRefGoogle Scholar
  16. Bonaccorsi Di Patti E, Dell’Ariccia G (2004) Bank competition and firm creation. J Money Credit Bank 36:225–251CrossRefGoogle Scholar
  17. Boot AWA (2000) Relationship banking: what do we know? J Financ Intermed 9:7–25CrossRefGoogle Scholar
  18. Boot AWA, Thakor AV (1994) Moral hazard und secured lending in an infinitely repeated credit market game. Int Econ Rev 35:899–920CrossRefGoogle Scholar
  19. Boot AWA, Thakor AV (2000) Can relationship banking survive competition? J Finance 55:679–713CrossRefGoogle Scholar
  20. Cameron A, Trivedi P (1990) Regression based tests for overdispersion in the Poisson model. J Econ 31:255–274Google Scholar
  21. Carletti E (2004) The structure of bank relationships, endogenous monitoring, and loan rates. J Financ Intermed 13:58–86CrossRefGoogle Scholar
  22. Carletti E, Cerasi V, Daltung S (2007) Multiple-bank lending: diversification and free-riding in monitoring. J Financ Intermed 16:425–451CrossRefGoogle Scholar
  23. Carter DA, McNulty JE, Verbrugge JA (2004) Do small banks have an advantage in lending? An examination of risk-adjusted yields on business loans at large and small banks. J Financ Serv Res 25:233–252CrossRefGoogle Scholar
  24. Cole RA (1998) The importance of relationships to the availability of credit. J Bank Financ 22:959–977CrossRefGoogle Scholar
  25. Cosci S, Meliciani V (2002) Multiple banking relationships: evidence from the Italian experience. Manchester School Supplement 37–54Google Scholar
  26. Credit Suisse (2003) Filialabbau: Raiffeisenbanken im Sog der Marktkräfte Spotlight, Economic and Policy Consulting, Credit Suisse, October 15Google Scholar
  27. Credit Suisse (2004) Basel II—Meilenstein der Bankenregulierung. Economic Briefing (36), ZurichGoogle Scholar
  28. D’Auria C, Foglia A, Reetz PM (1999) Bank interest rates and credit relationships in Italy. J Bank Financ 23:1067–1093CrossRefGoogle Scholar
  29. Degryse H, Ongena S (2001) Bank relationships and firm performance. Financ Manage 30:9–34CrossRefGoogle Scholar
  30. Degryse H, Ongena S (2007) The impact of competition on bank orientation. J Financ Intermed 399–424Google Scholar
  31. Detragiache E, Garella P, Guiso L (2000) Multiple versus single banking relationships: theory and evidence. J Financ 55:1133–1161CrossRefGoogle Scholar
  32. Dewatripont M, Maskin E (1995) Credit and efficiency in centralized and decentralized economics. Rev Econ Stud 62:541–555CrossRefGoogle Scholar
  33. Diamond D (1984) Financial intermediation and delegated monitoring. Rev Econ Stud 51:393–414CrossRefGoogle Scholar
  34. Elsas R (2005) Empirical determinants of relationship lending. J Financ Intermed 14:32–57CrossRefGoogle Scholar
  35. Elsas R, Krahnen JP (1998) Is relationship lending special? Evidence from credit-file data in Germany. J Bank Financ 22:1283–1316CrossRefGoogle Scholar
  36. Elsas R, Krahnen JP (2000) Collateral, default risk, and relationship lending: an empirical study on financial contracting. CFS Working Paper no. 1999/13, Center for Financial Studies, University of Frankfurt, revised version, November 25Google Scholar
  37. Elyasiani E, Goldberg LG (2004) Relationship lending: a survey of the literature. J Econ Bus 56:315–330CrossRefGoogle Scholar
  38. Elsas R, Heinemann F, Tyrell M (2004) Multiple but asymmetric bank financing: the case of relationship lending.” CESifo working paper no. 1251, 2004.Google Scholar
  39. Ferri G, Kang TS, Kim IJ (2001) The value of relationship banking during financial crises. Evidence from the Republic of Korea. Policy Research Working Paper 2553, The World Bank, 2001Google Scholar
  40. Fok RCW, Chang YC, Lee WT (2004) Bank relationships and their effects on firm performance around the Asian financial crisis: evidence from Taiwan. Financ Manage 33:89–112Google Scholar
  41. Guiso L (2003) Small business finance in Italy. European Investment Bank Papers 8:121–149Google Scholar
  42. Guiso L, Minetti R (2004) Multiple creditors and information rights: theory and evidence from US Firms. CEPR Discussion Paper no. 4278Google Scholar
  43. Hannan TH (2003) Changes in non-local lending to small business. J Financ Serv Res 24:31–46CrossRefGoogle Scholar
  44. Harhoff D, Körting T (1998a) Lending relationships in Germany: empirical evidence from survey data. J Bank Financ 22:1317–1353CrossRefGoogle Scholar
  45. Harhoff D, Körting T (1998b) How many creditors does it take to tango? Discussion Paper, Wissenschaftszentrum Berlin and Zentrum für Europäische Wirtschaftsforschung, MannheimGoogle Scholar
  46. Hauswald R, Marquez R (2006) Competition and strategic information acquisition in credit markets. Rev Financ Stud 19:967–1000CrossRefGoogle Scholar
  47. Hellwig M (1991) Banking, financial intermediation and corporate finance. In: Giovannini A, Mayer C (ed) European financial integration. Cambridge University Press, 35–63, CambridgeGoogle Scholar
  48. Hertig G (1998) Lenders as a force in corporate governance criteria and practical examples for Switzerland. In: Hopt KJ, Kanda H, Roe MJ, Wymeresch E, Prigge S (eds) Comparative corporate governance. Clarendon, Oxford, pp 809–835Google Scholar
  49. IMF (2007) Switzerland: financial sector assessment program—technical note—the Swiss banking system: structure, performance, and medium-term challenges, IMF Country Report no. 07/199. International Monetary Fund, Washington, DCGoogle Scholar
  50. Jean-Baptiste EL (2005) Information monopoly and commitment in intermediary-firm relationships. J Financ Serv Res 27:5–26CrossRefGoogle Scholar
  51. Koziol C (2005) When does single-source versus multiple-source lending matter? Working paper, University of Mannheim, GermanyGoogle Scholar
  52. La Porta R, Lopez-de-Silanes F, Shleifer A, Vishny RW (1997) Legal determinants of external finance. J Financ 52:1131–1150CrossRefGoogle Scholar
  53. La Porta R, Lopez-de-Silanes F, Shleifer A, Vishny RW (1998) Law and finance. J Polit Econ 106:1113–1155CrossRefGoogle Scholar
  54. Lehmann E, Neuberger D (2001) Do lending relationships matter? Evidence from bank survey data in Germany. J Econ Behav Organ 45:339–359CrossRefGoogle Scholar
  55. Lehmann E, Neuberger D, Räthke S (2004) Lending to small and medium-sized firms: is there an east–west gap in Germany? Small Bus Econ 2:3:23–39CrossRefGoogle Scholar
  56. Levine R (1999) Law, finance, and economic growth. J Financ Intermed 8:8–35CrossRefGoogle Scholar
  57. Machauer A, Weber M (1998) Bank behavior based on internal credit rating of borrowers. J Bank Finance 22:1355–1383CrossRefGoogle Scholar
  58. Machauer A, Weber M (2000) Number of bank relationships: an indicator of competition, borrower quality, or just size? CFS Working Paper 2000/2006, Frankfurt/Main, GermanyGoogle Scholar
  59. Mauro P (1995) Corruption and growth. Q J Econ 110:681–712CrossRefGoogle Scholar
  60. Menkhoff L, Neuberger D, Suwanaporn C (2006) Collateral-based lending in emerging markets: evidence from Thailand. J Bank Financ 30:1–21CrossRefGoogle Scholar
  61. Montoriol Garriga J (2006a) Relationship lending and banking competition: are they compatible? Universitat Pompeu Fabra, BarcelonaGoogle Scholar
  62. Montoriol Garriga J (2006b) The effect of relationship lending on firm performance. Universitat Pompeu Fabra, BarcelonaGoogle Scholar
  63. Neuberger D, Räthke S (2008) Microenterprises and multiple bank relationships: the case of professionals. Small Bus Econ (in press)Google Scholar
  64. Neuberger D, Räthke S, Schacht C (2006) The number of bank relationships of smes: a disaggregated analysis of changes in the Swiss loan market. Econ Notes 35:1–36, (November)CrossRefGoogle Scholar
  65. Ogawa K, Sterken E, Tokutsu I (2007) Why do Japanese firms prefer multiple bank relationships? Some Evidence from firm-level data. Econ Syst 31:49–70CrossRefGoogle Scholar
  66. Ongena S, Smith DC (2000a) Bank relationships: a review. In: Harker P, Zenios SA (eds) The Performance of Financial Institutions. Cambridge University Press, Cambridge, pp 221–258Google Scholar
  67. Ongena S, Smith DC (2000b) What determines the number of bank relationships? Cross-country evidence. J Financ Intermed 9:26–56CrossRefGoogle Scholar
  68. Ongena S, Smith DC (2001) The duration of bank relationships. J Financ Econ 61:449–475CrossRefGoogle Scholar
  69. Ongena S, Tümer-Alkan G, von Westernhagen N (2007) Creditor concentration: an empirical investigation. Tilburg University, TilburgGoogle Scholar
  70. Pedergnana M, Schacht C, Sax C (2004) Kreditbeziehungen zwischen Banken und KMU.“Luzern: Verlag IFZ–HSWGoogle Scholar
  71. Petersen MA, Rajan RG (2002) Does distance still matter? The information revolution in small business lending. J Financ 57:2533–2570CrossRefGoogle Scholar
  72. Petersen MA, Rajan RG (1994) The benefits of lending relationships: evidence from small business data. J Financ 44:3–37CrossRefGoogle Scholar
  73. Petersen MA, Rajan RG (1995) The effect of credit market competition on lending relationships. Q J Econ 110:407–433CrossRefGoogle Scholar
  74. Qian J, Strahan PE (2005) How law and institutions shape financial contracts: the case of bank loans. NBER Working Paper 11052Google Scholar
  75. Rajan RG (1992) Insiders and outsiders: the choice between informed and arm’s-length debt. J Financ 47:1367–1400CrossRefGoogle Scholar
  76. Schacht C (2005) Angebotsmechanismen und Nachfragestrukturen im Kreditmarkt Schweiz. Hamburg: Dr. KovacGoogle Scholar
  77. Schmid A, Varnholt B (1997) Kreditgeschäft im Wandel. In: Schmid C, Varnholt B (eds) Finanzplatz Schweiz. Probleme und Zukunftsperspektiven. Zurich, pp 309–331Google Scholar
  78. Schweizerische Nationalbank (1997) Die Banken in der Schweiz 1996–2005. Zürich, 1997–2006.Google Scholar
  79. Sharpe SA (1990) Asymmetric information, bank lending, and implicit contracts: a stylized model of customer relationships. J Financ 45:1069–1087CrossRefGoogle Scholar
  80. Thakor AV (1996) Capital requirements, monetary policy, and aggregate bank lending: theory and empirical evidence. J Financ 51:279–324CrossRefGoogle Scholar
  81. von Thadden EL (1992) The commitment of finance, duplicated monitoring and the investment horizon. ESF–CEPR, LondonGoogle Scholar
  82. Yu H, Hsieh D (2006) Multiple versus single banking relationships in an emerging market: some Taiwanese evidence. In: Lynde VR (ed) International banking issues. Nova, USAGoogle Scholar
  83. Ziane Y (2003) Number of banks and credit relationships: empirical results from French small business data. Eur Rev Econ Financ 2:33–60Google Scholar

Copyright information

© Springer Science+Business Media, LLC 2008

Authors and Affiliations

  • Doris Neuberger
    • 1
  • Maurice Pedergnana
    • 2
  • Solvig Räthke-Döppner
    • 1
  1. 1.Department of EconomicsUniversity of RostockRostockGermany
  2. 2.IFZ Institute for Financial Services ZugUniversity of Applied Sciences Central SwitzerlandZugSwitzerland

Personalised recommendations