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Bank-firm relations and the role of Mutual Guarantee Institutions during the crisis

Author

Listed:
  • Francesca Bartoli

    (UniCredit Group)

  • Giovanni Ferri

    (University of Bari)

  • Pierluigi Murro

    (University of Bari)

  • Zeno Rotondi

    (Unicredit Group)

Abstract
We examine the role played by Mutual Guarantee Institutions (MGIs) in the lending policies undertaken by banks at the peak of the Great Crisis of 2007-2009. We address this issue by using a large database on Italian firms built from the credit files of UniCredit banking Group and focusing on small business. We provide an empirical analysis of the determinants of the probability that a borrowing firm will suffer financial tension and obtain two main innovative findings. First, we show that small firms supported by MGIs were less likely to experience financial tensions even at that time of utmost financial stress. Second, our empirical evidence shows that MGIs have played a signalling role beyond the simple provision of a collateral. This latter finding suggests that the information provided by MGIs turned out to be key for bank-firm relations as scoring and rating systems - being typically based on pro-cyclical indicators - had become less informative during the crisis.

Suggested Citation

  • Francesca Bartoli & Giovanni Ferri & Pierluigi Murro & Zeno Rotondi, 2011. "Bank-firm relations and the role of Mutual Guarantee Institutions during the crisis," SERIES 0034, Dipartimento di Economia e Finanza - Università degli Studi di Bari "Aldo Moro", revised Jan 2011.
    • Handle: RePEc:bai:series:economia-series34
    as

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    References listed on IDEAS

    as
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    More about this item

    Keywords

    financial crisis; bank-firm relationships; asymmetric information; credit guarantee schemes; small business finance; peer monitoring;
    All these keywords.

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General

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