Abstract
Taking advantage of a unique panel of small and medium-sized manufacturing firms observed from 1998 to 2006, this work investigates the determinants of multiple lending relationships in a country where small businesses are the heart of the productive structure. Our results suggest that larger, more indebted and innovative firms tend to be more inclined to establish multiple relationships. Conversely, closer ties with a main bank seem decreasing the propensity to be multiple-banked. Finally, we detect some persistence in the number of relationships, presumably due to switching costs.
Keywords: Hold-up problem, Italian small business, liquidity risk, managerial skills, multinomial logit model, multiple banking relationships, reputation, small and medium-sized firms, soft budget constraint problem, switching costs.
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