This article empirically verifies the existence of a connection between the relationship-oriented model and the quality of the loan portfolio, by using alternative risk measures to previous studies. Consistently with earlier literature, bank size, distance and intensity of labour are used as proxies for the relationship lending model. The main results demonstrate that the relationship lending variables are all significant contributory factors to the loan portfolio quality. Robustness tests, conducted using intermediate risk measures (Doubtful Loan Rate (DLR), Past Due Loan Rate (PDLR)), confirm the results. Our findings are consistent with the relationship lending literature, but we extend to Default Rate (DR) measurement, a new role in terms of a banking model to create loans and manage credit risk. Finally, banking literature can take advantage of the DR indicator as a proxy for the quality of loan portfolio, and we consider its strong relationship to the intermediation model chosen. Keywords: loan portfolio quality; relationship lending; bank size; distance; credit risk JEL Classification: G21; L23
Relationship lending, default rate and loan portfolio quality / Cotugno M.; Stefanelli V.; Torluccio G.. - In: APPLIED FINANCIAL ECONOMICS. - ISSN 1466-4305. - ELETTRONICO. - 23:(2013), pp. 573-587. [10.1080/09603107.2012.744133]
Relationship lending, default rate and loan portfolio quality
COTUGNO, MATTEO;TORLUCCIO, GIUSEPPE
2013
Abstract
This article empirically verifies the existence of a connection between the relationship-oriented model and the quality of the loan portfolio, by using alternative risk measures to previous studies. Consistently with earlier literature, bank size, distance and intensity of labour are used as proxies for the relationship lending model. The main results demonstrate that the relationship lending variables are all significant contributory factors to the loan portfolio quality. Robustness tests, conducted using intermediate risk measures (Doubtful Loan Rate (DLR), Past Due Loan Rate (PDLR)), confirm the results. Our findings are consistent with the relationship lending literature, but we extend to Default Rate (DR) measurement, a new role in terms of a banking model to create loans and manage credit risk. Finally, banking literature can take advantage of the DR indicator as a proxy for the quality of loan portfolio, and we consider its strong relationship to the intermediation model chosen. Keywords: loan portfolio quality; relationship lending; bank size; distance; credit risk JEL Classification: G21; L23I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.