Relationship lending and firm innovativeness

Firm Innovativeness in Smes: Lessons from Japan

Fostering greater firm innovativeness may just be the most critical advantage organisations must develop to effectively compete in the markets of not only today, but those of tomorrow as well. The connection between volatile and dynamic environments and the need for firms to be more innovative is oft made, and Japan in particular has faced trying conditions, experiencing perhaps the most prolon...

Optimal Lending Contracts and Firm Dynamics

We develop a general model of lending in the presence of endogenous borrowing constraints. Borrowing constraints arise because borrowers face limited liability and debt repayment cannot be perfectly enforced. In the model, the dynamics of debt are closely linked with the dynamics of borrowing constraints. In fact, borrowing constraints must satisfy a dynamic consistency requirement: the value o...

Optimal Lending Contracts and Firm Dynamics1

We develop a general model of lending in the presence of endogenous borrowing constraints. Borrowing constraints arise because borrowers face limited liability and debt repayment cannot be perfectly enforced. In the model, the dynamics of debt are closely linked with the dynamics of borrowing constraints. In fact, borrowing constraints must satisfy a dynamic consistency requirement: The value o...

Bank Deposits and Relationship Lending∗

I study the role of deposit accounts in bank-firm lending relationships, using a dataset with detailed information about all Norwegian firms’ bank deposit and loan account balances. I show that firms are more likely to increase borrowing from a bank where they hold deposit accounts, and less likely to end the lending relationship. In regressions with both firm and bank fixed effects, I find tha...

The Empirical Relationship Between Inequality and Innovativeness