Bank relationship loss: The moderating effect of information opacity

Yuqian Xu, Anthony Saunders, Binqing Xiao, Xindan Li

Research output: Contribution to journalArticlepeer-review

Abstract

We examine the impact on a firm when it is forced to switch its bank relationship from one branch to another branch of the same bank, and how the firm's information opacity (as proxied by the frequency with which the firm provides financial statements to the bank) moderates the consequences of relationship loss. We find the effect depends on the relative balance between the hard accounting information provided to the bank and the soft information about the firm due to its prior branch relationship. We show the loss of soft information provided to loan officers at the new branch, as a result of the forced branch switch, has a significant effect on the cost, maturity, and availability of loans from the new branch. Furthermore, we document the moderating effect of accounting information opacity on loan conditions upon relationship loss.

Original languageEnglish (US)
Article number105872
JournalJournal of Banking and Finance
Volume118
DOIs
StatePublished - Sep 2020

Keywords

  • Accounting information
  • Bank relationship
  • Credit access
  • Loan cost
  • Opacity

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics

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