Role of Social Relationships in Financial Intermediation: Empirical Evidence fromthe United States Small-Business Credit Market

摘要

One factor that discourages lending to small firms is the high cost of searchingfor information. The project, part of a Ph.D. dissertation, tests the hypothesis that personal relationships between borrowers and lenders affect loan terms and conditions. A theoretical model, the hedonic price theory, was developed to describe the relationships. The model suggests that a borrower-lender relationship should reduce the interest rate, that the distance separating a bank and a given client and different client characteristics, such as equity investment, may also reduce the interest rate on credit. The main empirical findings include: (1) the personal relationship variable was found to be significant, serving to reduce small firm borrowing costs by over 3/4 percent, and (2) borrowers which located near the banks paid lower rates, (3) empirical results were strongest for smaller firms.