Search

Alcohol has long been known as the demon drink; an epithet owed to numerous social ills associated with it. Our lab-in-the-field experiment assesses the extent to which intoxication leads to changes in overconfidence or cognitive ability that are often linked to problematic behaviours. Results suggest that it is the joint effect of being intoxicated in a bar that matters. Subjects systematically underestimated their magnitude, suggesting that they cannot be held fully accountable for their actions.

It is well recognized that relationship banking helps to relieve the credit constraints faced by SMEs to access bank finance. Trust is an important part of relationship banking. However, the term trust is nebulous, and relationship banking means different things to different banks and different borrowers. How trust enables the credit market for SMEs through relationship banking is largely unexplored. Using a unique primary dataset of SMEs in the UK, we construct a measure of trust-based relationship banking from the perspective of the borrower. We examine the drivers of trust-based relationship banking in terms of organizational trust in the relationship manager, defined as the delegation of operational autonomy, along with local market and social capital factors, and the style of the bank-borrower relationship. Along with bank, firm, and market factors, trust-based relationship banking helped to reduce the credit constraints faced by SMEs in the decade following the global financial crisis.

A growing literature addresses the costs and benefits associated with relationship banking, articularly for smaller firms, but with much of this work focused on normal trading conditions. Covid-19 rovides 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 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.

One of the many papers accepted for but denied presentation at the Society’s annual conference earlier this year was one that looked at why the consumption of alcohol appears to be associated with\udincreased violent behaviour. Iain Long has produced this summary of the paper which reports on an\udexperiment carried out at Cardiff University

This paper analyses the duration of firm-bank relationships and examines what drives firms in China to change from one bank loan provider to another. Matched data of firm-loan-duration to bank provides a unique panel data set of relationship between China's listed firms and their lending banks consisting of 2,102 firms listed on both the Shanghai Stock Exchange and Shenzhen Stock Exchange in the period of 1996-2016. The Cox proportional hazard model is used to allow for a semiparametric hazard function after parametrically controlling for firmspecific financial factors, industry factors, ownership characteristics, internal management changes, and external macroeconomic changes. In addition, we explore the impact of the 2008 financial crisis, bank-financial and ownership characteristics. The main finding of this study is that in an environment of growing commercialisation of relationships the firm-bank relationship between state-owned enterprises (SOEs) and state-owned banks (SOBs) in China remains super-stable. However, a change in the CEO of a firm even of a SOE increases the probability of the loan-provider being changed.

We conduct a field experiment to assess whether alcohol-induced behavioural changes explain participants' recent history of violence. We find that being in a drinking environment, rather than intoxication, reduces participants' cognitive ability but increases their overconfidence. Those who experience small reductions in ability or become much more overconfident tended to have been involved in more violent incidents. Since these behavioural changes were largely unanticipated, our results suggest that individuals underestimate their true likelihood of becoming involved in violence when making alcohol consumption decisions. This presents additional challenges when formulating policy designed to deter alcohol-fuelled violence.