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Relationship Lending and Employment Decisions in Firms' Bad Times.

Relationship Lending and Employment Decisions in Firms' Bad Times.

Authors :
Murro, Pierluigi
Oliviero, Tommaso
Zazzaro, Alberto
Source :
Journal of Financial & Quantitative Analysis; Sep2023, Vol. 58 Issue 6, p2657-2691, 35p
Publication Year :
2023

Abstract

Using firm-level survey information, we investigate whether relationship lending affects firms' employment decisions in the face of negative sales shock. We find that firms with a durable relationship with their main bank display significantly less employment growth sensitivity to such shocks, especially where these are transitory. The result is stronger for younger and smaller firms that benefit from tighter bank-firm relationships, and for firms in sectors or economic environments where the costs of employment adjustment are greater. Our findings indicate that relationship lending provides liquidity insurance to firms to meet their demand for labor hoarding. [ABSTRACT FROM AUTHOR]

Details

Language :
English
ISSN :
00221090
Volume :
58
Issue :
6
Database :
Complementary Index
Journal :
Journal of Financial & Quantitative Analysis
Publication Type :
Academic Journal
Accession number :
172047086
Full Text :
https://doi.org/10.1017/S0022109022000928