| Name: | Description: | Size: | Format: | |
|---|---|---|---|---|
| 312.77 KB | Adobe PDF |
Authors
Advisor(s)
Abstract(s)
This paper provides new evidence for the relationship between the stability of the banking relationship, ownership
concentration and operating profitability, supporting non-linear effects between those variables in the context of small
and medium enterprises (SMEs). From a sample of 4,163 Portuguese SMEs and cross-section data and panel data, we
found evidence for a U-shaped quadratic relationship between the stability of the banking relationship and operational
performance. This result indicates that the consolidation of new banking relationships, the difficulties experienced by
SMEs in overcoming the problems of adverse selection and moral hazard reflect negatively on their operating
profitability. However, when the banking relationship is solidified, and banking institutions acquire information,
supervision and monitoring costs decrease, credit constraints are lower and contractual conditions are tailored to the
needs of the company, with positive impacts on operating profitability. In turn, the quadratic specification established
between ownership concentration and operating profitability suggests that the expropriation hypothesis prevails for
low levels of control rights and the supervision hypothesis prevails for high levels.
Description
Keywords
stability of the banking relationship ownership concentration operating profitability nonlinear effects panel data
Citation
Publisher
sciedu.ca