Family Firms, Soft Information and Bank Lending in a Financial Crisis

Leandro D’Aurizio (), Tommaso Oliviero () and Livio Romano ()

CSEF Working Papers from Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy

Abstract: This paper studies how access to bank lending differed between family and non-family firms in the 2007-2009 financial crisis. The theoretical prediction is that family block-holders’ incentive structure results in lower agency conflict in the borrower-lender relationship. Using highly detailed data on bank-firm relations, we exploit the reduction in bank lending in Italy following the crisis in October 2008. We find statistically and economically significant evidence that the contraction in credit for family firms was smaller than that for non-family firms. Results are robust to ex-ante observable differences between the two types of firms and to time-varying bank fixed effects. We further show that the difference in the amount of credit granted to family and non-family firms is related to an increased role for soft information in Italian banks’ operations, following the Lehman Brothers’ failure. Finally, by identifying a match between those banks and family firms, we can control for time-varying unobserved heterogeneity among the firms and validate the hypothesis that our results are supply driven.

Keywords: Family firms; Financial crisis; Soft information; Bank lending (search for similar items in EconPapers)
JEL-codes: C81 D22 E44 G21 G32 L26 (search for similar items in EconPapers)
Date: 2014-03-29
New Economics Papers: this item is included in nep-ban, nep-ger, nep-mac and nep-sbm
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Citations: View citations in EconPapers (11)

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Related works:
Journal Article: Family firms, soft information and bank lending in a financial crisis (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:sef:csefwp:357

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