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Bank Relationships (bank + relationships)

Distribution by Scientific Domains

Business, Economics, Finance and Accounting	100%

Selected Abstracts

Bank Relationships and the Value Relevance of the Income Statement: Evidence from Income-Statement Conservatism

JOURNAL OF BUSINESS FINANCE & ACCOUNTING, Issue 7-8 2007
Wooseok ChoiArticle first published online: 10 MAY 200
Abstract:, This study examines the effects of a firm's debt financing decision on the informativeness of the income statement. This study specifically examines the association between a firm's bank dependence and the value relevance of the income statement by investigating the income-statement conservatism of firms with bank loans. Focusing on relatively small businesses, this study finds that income-statement conservatism, measured as timely loss recognition, is increasing in a firm's bank dependence. This study also finds that the value relevance of the income statement is increasing in a firm's bank dependence. The findings of this paper suggest that the usefulness of the income statement varies with a firm's bank dependence, indicating that the value relevance of the income statement is a function of a firm's debt financing decision. The findings further suggest that bank relationships affect the value relevance of the income statement through their influence on income-statement conservatism. [source]

Bank Mergers and Small Firm Finance: Evidence from Lender Liability

FINANCIAL MARKETS, INSTITUTIONS & INSTRUMENTS, Issue 2 2008
James E. McNulty
As a merger approaches, the value of repeat business for the target bank can drop sharply, so loan relationships between this bank and small businesses are often disrupted. Small firms sometimes experience serious value destruction as a consequence of this sudden lack of credit. This paper shows that lender liability may result from bank mergers and bankers involved in mergers often engage in aggressive, scorched-earth defense tactics to discourage further litigation. I summarize six lender liability cases to illustrate these points. Bank mergers have been shown to reduce credit availability in a number of studies. Since small firms depend on credit for their daily existence, owners of small firms do have a reason to fear a merger of their bank with a larger institution. Analyzing merger effects with survey data of firms obtained after a bank merger, an empirical strategy used in a number of studies, raises problems since the only firms considered are the ones that survived the bank merger. Suggesting that the problem will cure itself in the long run, an argument advanced in other studies, ignores small firms' daily dependence on credit. In the long run we are all dead. Bank examiners need to evaluate an institution's litigation experience and measure a bank's organizational architecture , its ethical climate. Banks which are repeatedly involved in lender liability lawsuits should be denied future mergers until there is a change in organizational architecture. To assist in evaluating organizational architecture, banks should be required to report their litigation expense on their call reports. Furthermore, regulators should seriously consider the recent suggestion of Carow, Kane and Narayanan (2006) that they take steps to ensure that participants in bank mergers preserve target bank relationships. Otherwise negative effects on small business lending and economic growth will continue as bank consolidation proceeds. [source]

Bank Relationships and the Value Relevance of the Income Statement: Evidence from Income-Statement Conservatism

Bank Relationship and Firm Performance: Evidence From Thailand Before the Asian Financial Crisis

JOURNAL OF BUSINESS FINANCE & ACCOUNTING, Issue 9-10 2004
Piman Limpaphayom
Abstract: This study examines the relation between bank relations and market performance in Thailand, an economy in which commercial banks play a crucial role through lending relationship and, for a number of companies, equity ownership. Overall, bank relationships, both equity-based and debt-based, positively affect capital investment. However, there is a negative relation between lending relationships, both short-term and long-term, and market performance indicating that bank lending may not always be consistent with value maximization. There is also evidence of a positive marginal effect of bank monitoring through equity ownership on market performance. Further, the relation between bank equity ownership and market performance appears to be non-linear with a concave function. Ownership by corporate insiders is also negatively related to bank equity ownership. Overall, the findings highlight the detrimental effects of excessive short-term debt usage, one of the factors believed to contribute to the financial crisis in Thailand, and the marginal benefit of the equity-based relationship on firm value. [source]

Credit Risk Assessment and Relationship Lending: An Empirical Analysis of German Small and Medium-Sized Enterprises,

JOURNAL OF SMALL BUSINESS MANAGEMENT, Issue 2 2007
Patrick Behr
We estimate a logit scoring model for the prediction of the probability of default by German small and medium-sized enterprises (SMEs) using a unique data set on SME loans in Germany. Our scoring model helps SMEs to gain knowledge about their default risk, which can be used to approximate their risk adequate cost of debt. This knowledge is likely to lead to a detection of hold-up problems that German SMEs might be confronted with in their bank relationships. Furthermore, it allows them to monitor their bank's pricing behavior and it reduces information asymmetries between lenders and borrowers. Finally, it can influence their future financing decisions toward capital market-based financing. [source]