Neither true nor fairweather friend: relationship banking and SME borrowing under Covid-19

Zhao, Tianshu, Matthews, Kent ORCID: https://orcid.org/0000-0001-6968-3098 and Munday, Maxim ORCID: https://orcid.org/0000-0001-9067-2481 2023. Neither true nor fairweather friend: relationship banking and SME borrowing under Covid-19. European Journal of Finance 29 (16) , pp. 1957-1974. 10.1080/1351847X.2022.2092415

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Abstract

A growing literature addresses the costs and benefits associated with relationship banking, particularly for smaller firms, but with much of this work focused on normal trading conditions. Covid-19 provides an ideal testbed to explore the resilience of relationship banking. We examine whether the presence of closer pre-Covid ties between SMEs and their banks helps in accessing funds in the Covid-19 pandemic period. Then are ties between relationship bankers and SME borrowers a case of ‘true love’ or rather are the parties more akin to ‘fair-weather friends?’ Data from the UK SME Finance Monitor from 2018Q2-2020Q3 is used in this paper to examine this question. Our analysis suggests that relationship banking was important for the acquisition of bank credit pre-Covid-19 but was of limited influence in post-Covid-19 lending behaviour. Banks treated SMEs that had a good relationship with them in the same way as those that did not and with public interventions to support lenders material in this.

Item Type:	Article
Date Type:	Publication
Status:	Published
Schools:	Business (Including Economics)
Subjects:	H Social Sciences > HG Finance
Publisher:	Routledge
ISSN:	1351-847X
Date of First Compliant Deposit:	17 June 2022
Date of Acceptance:	23 May 2022
Last Modified:	04 Oct 2023 18:48
URI:	https://orca.cardiff.ac.uk/id/eprint/150577

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