What Drives the Bank–Firm Relationship? A Case Study of the Polish Credit Market
Macroeconomic Analysis and International Finance
ISBN: 978-1-78350-755-9, eISBN: 978-1-78350-756-6
Publication date: 26 April 2014
Abstract
Purpose
The aim of this study is to understand the determinants of relationship between banks and nonfinancial corporations within Poland (which are considered relationship banking from this point onward).
Design/methodology/approach
The main sources of data used in the study are the large credit database (credit register of the National Bank of Poland (NBP)) and other aggregated data, including data from the Warsaw Stock Exchange and the NBP. Econometric panel logit methods have been used to test how different factors affect bank–firm relationships. Three main groups of factors have been investigated: the characteristics of the firm (i.e., size, ownership type, and R&D activity); the characteristics of the financial sector (i.e., competition in the banking sector); and macroeconomic conditions.
Findings
The findings demonstrate that Polish firms readily establish single-bank relationships, and firms with the highest quality of credit portfolios borrow often from multiple creditors. All conducted estimations demonstrated that the relationship between financing from a single bank and from foreign capital had a positive sign. Also, a decrease in concentration in the banking sector, which may be identified with an increase in competition, supports the establishment of relationship banking.
Research limitations/implications
The study was performed using the data from large exposure database collected for supervisory purposes. Exposures (credits, derivatives, etc.) larger than 500 thousand PLN (approx. 120 thousand EUR) were only considered. Future research on bank–firm relationships should focus on the influence of financing costs, maintaining relationships when the borrower is in a difficult financial position, and other unique features of banks using the strategy of relationship financing.
Practical implications
The understanding of the characteristics of bank–firm relationships can help to improve banking practice and supervisory policy in Poland.
Originality/value
This study makes a noticeable contribution to the understanding of the banking sector and its relationships with nonfinancial corporations in Poland. It is the first empirical study on such a large sample of panel data from Polish banking sector and industries, too.
Keywords
Acknowledgements
Acknowledgment
This article includes personal views of the authors and does not necessarily represent the position of the NBP. The authors are responsible for any and all errors.
Citation
Pawłowska, M., Gajewski, K. and Rogowski, W. (2014), "What Drives the Bank–Firm Relationship? A Case Study of the Polish Credit Market", Macroeconomic Analysis and International Finance (International Symposia in Economic Theory and Econometrics, Vol. 23), Emerald Group Publishing Limited, Leeds, pp. 235-268. https://doi.org/10.1108/S1571-038620140000023009
Publisher
:Emerald Group Publishing Limited
Copyright © 2014 Emerald Group Publishing Limited