Relationship Bank,s Management Efficiency and Client firm,s Performance A case of Pakistan
Author(s)
Jahanzaib Sultan , Fahad Javed , Aamir Inam Bhutta , Muhammad Fayyaz Sheikh , Prof. Chen Xiaofeng ,
Download Full PDF Pages: 77-82 | Views: 1254 | Downloads: 365 | DOI: 10.5281/zenodo.3483347
Abstract
Firm-bank relationship is a matter of interest as a strong bonding may lead to a better performance of the client firm. The foggy mirror of the fate of such relationships needs more clarification on the said matter. This research investigated the effect of management efficiency of relationship bank on its client firm’s performance. The data set consists of the observations for the period from 2006-2016. All the non-financial listed firms on Pakistan Stock Exchange are taken for analysis. We have taken all the common proxies for the firm performance like ROA, ROS, ROE and Tobin’s Q and regressed them over bank-specific and firm-specific variables. For management efficiency, two types of measurements are considered, i.e., ME and LME. Our results have reported management efficiency of the relationship bank as a vital factor in explaining the fate of firm-bank relationship and its performance. It is found to be significant and positive for client firm’s performance. Further analysis has exposed that if the increased number of firm-bank relationship causes an increase in financial cost as well, then the benefit of maintaining a relationship with a bank (efficient in management) is set off.
Keywords
Firm-bank Relationship, firm performance, Management Efficiency, multi-bank relationship
References
i. Albareto, G., Benvenuti, M., Mocetti, S., Pagnini, M., & Rossi, P. (2011). The Organization of Lending and the Use of Credit Scoring Techniques in Italian Banks. The Capco Institute Journal of Financial Transformation, 32, 143-157.
ii. Angelini, P., Di Salvo, R., & Ferri, G. (1998). Availability and cost of credit for small businesses: customer relationships and credit cooperatives. Journal of Banking & Finance, 22(6), 925-954.
iii. Bhattacharya, S., & Chiesa, G. (1995). Proprietary information, financial intermediation, and research incentives. Journal of Financial Intermediation, 4(4), 328-357.
iv. Bhaumik, S. K., & Piesse, J. (2008). Does lending behaviour of banks in emerging economies vary by ownership? Evidence from the Indian banking sector. Economic Systems, 32(2), 177-196.
v. Bolton, P., & Freixas, X. (2000). Equity, bonds, and bank debt: Capital structure and financial market equilibrium under asymmetric information. Journal of Political Economy, 108(2), 324-351.
vi. Bolton, P., & Scharfstein, D. S. (1996). Optimal debt structure and the number of creditors. Journal of Political Economy, 1-25.
vii. Boot, A. W. (2000). Relationship banking: What do we know? Journal of Financial Intermediation, 9(1), 7-25.
viii. Campbell, T. S. (1979). Optimal investment financing decisions and the value of confidentiality. Journal of Financial and Quantitative Analysis, 14(05), 913-924.
ix. Cenni, S., Monferrà, S., Salotti, V., Sangiorgi, M., & Torluccio, G. (2015). Credit rationing and relationship lending. Does firm size matter? Journal of Banking & Finance, 53, 249-265.
x. Chen, Z., Li, Y., & Zhang, J. (2015). The Bank-firm Relationship: Helping or Grabbing? International Review of Economics & Finance.
xi. Clarke, G., Cull, R., & Peria, M. S. M. (2002). How does foreign bank participation affect access to credit by SMEs? Evidence from survey data. World Bank Working Paper.
xii. Delis, M. D., Kokas, S., & Ongena, S. (2016). Bank market power and firm performance. Review of Finance, rfw004.
xiii. James, C. (1987). Some evidence on the uniqueness of bank loans. Journal of Financial Economics, 19(2), 217-235.
xiv. Khwaja, A. I., & Mian, A. (2008). Tracing the impact of bank liquidity shocks: Evidence from an emerging market. The American economic review, 98(4), 1413-1442.
xv. Morck, R., Nakamura, M., & Shivdasani, A. (2000). Banks, Ownership Structure, and Firm Value in Japan*. The Journal of Business, 73(4), 539-567.
xvi. Sekaran, U. (2006). Research methods for business: A skill building approach: John Wiley & Sons.
xvii. Sultan, J., Javed, F., Bhutta, A. I., & Qing, Y. (2016). Bank-firm Relationships vs Financial Expenses of the Client Firm: Evidence from Developing Markets (Pakistan). Research Journal of Finance and Accounting, 7(20), 1-4.
xviii. Sultan, J., Qing, Y., & Abid, A. (2016). Multiple Bank Relationship and Their Impact on Firm’s Performance: Evidence from Pakistan. Journal on Innovation and Sustainability. RISUS ISSN 2179-3565, 7(2), 57-64.
xix. Thanh, V. H., & Ha, N. M. (2013). The Effect of Banking Relationship on Firm Performance in Vietnam. International Journal of Economics and Finance, 5(5), p148.
xx. Yao, J., & Ouyang, H. (2007). Dark-side evidence on bank–firm relationship in Japan. Japan and the World Economy, 19(2), 198-213.
Cite this Article: