Skip to content
Anchorcite

The Benefits of Lending Relationships: Evidence from Small Business Data

Mitchell A. Petersen, Raghuram G. Rajan

The Journal of Finance · 1994 · 5,402 citations

doi.org/10.1111/j.1540-6261.1994.tb04418.x

Abstract

ABSTRACT This paper empirically examines how ties between a firm and its creditors affect the availability and cost of funds to the firm. We analyze data collected in a survey of small firms by the Small Business Administration. The primary benefit of building close ties with an institutional creditor is that the availability of financing increases. We find smaller effects on the price of credit. Attempts to widen the circle of relationships by borrowing from multiple lenders increases the price and reduces the availability of credit. In sum, relationships are valuable and appear to operate more through quantities rather than prices.

Cite this paper

Petersen, M. A., & Rajan, R. G. (1994). The benefits of lending relationships: Evidence from small business data. The Journal of Finance, 49(1), 3–37. https://doi.org/10.1111/j.1540-6261.1994.tb04418.x

Read it with every claim anchored

Add this paper to a project, ask questions of it, and get answers that point to the exact passage.

Start free

Related papers

  1. Law and Finance1998
  2. On Persistence in Mutual Fund Performance1997
  3. The Cross‐Section of Expected Stock Returns1992
  4. Returns to Buying Winners and Selling Losers: Implications for Stock Market Efficiency1993
  5. Estimating Standard Errors in Finance Panel Data Sets: Comparing Approaches2008

Metadata from OpenAlex (CC0). Citations are generated from the published record.