Abstract
A growing literature addresses the costs and benefits associated with relationship banking, particularly for smaller firms, but with much of this work focused on normal trading conditions. Covid-19 provides an ideal testbed to explore the resilience of relationship banking. We examine whether the presence of closer pre-Covid ties between SMEs and their banks helps in accessing funds in the Covid-19 pandemic period. Then are ties between relationship bankers and SME borrowers a case of ‘true love’ or rather are the parties more akin to ‘fair-weather friends?’ Data from the UK SME Finance Monitor from 2018Q2-2020Q3 is used in this paper to examine this question. Our analysis suggests that relationship banking was important for the acquisition of bank credit pre-Covid-19 but was of limited influence in post-Covid-19 lending behaviour. Banks treated SMEs that had a good relationship with them in the same way as those that did not and with public interventions to support lenders material in this.
| Original language | English |
|---|---|
| Number of pages | 18 |
| Journal | European Journal of Finance |
| Early online date | 4 Jul 2022 |
| DOIs | |
| Publication status | E-pub ahead of print - 4 Jul 2022 |
Bibliographical note
Funding Information:We acknowledge support from the DFID-ESRC Research Grant (ES/N013344/2). We are grateful without implication to two anonymous referees for helpful comments. All remaining errors are ours.
Publisher Copyright:
© 2022 The Author(s). Published by Informa UK Limited, trading as Taylor & Francis Group.
Keywords
- Covid-19
- SMEs
- relationship banking
ASJC Scopus subject areas
- Economics, Econometrics and Finance (miscellaneous)