Evidence of jointness in the terms of relationship lending

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107 Scopus citations


This paper examines the impact of the borrower-lender relationship on the explicit loan interest rate and collateral, as well as the correlation between loan interest rates and collateral. Using a simultaneous equation approach, we find that collateral has a statistically significant positive impact of 200 to 400 basis points on loan interest rates. We find this positive association to be stronger for personal (or outside) collateral than collateral provided by the firm's assets (or inside collateral). Finally, we find the economic impact of the borrower-lender relationship to be 21 basis points for one standard deviation increase in relationship length.

Original languageEnglish (US)
Pages (from-to)452-476
Number of pages25
JournalJournal of Financial Intermediation
Issue number3
StatePublished - Jul 2007

All Science Journal Classification (ASJC) codes

  • Finance
  • Economics and Econometrics


  • Bank-customer relationship
  • Collateral
  • Implicit interest rates
  • Loan pricing


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