Supply Chain Characteristics and Bank Lending Decisions

46 Pages Posted: 29 Mar 2017

See all articles by Iftekhar Hasan

Iftekhar Hasan

Fordham University ; Bank of Finland; University of Sydney

Kristina Minnick

Bentley University

Kartik Raman

Bentley University

Date Written: March 29, 2017

Abstract

This paper investigates whether borrowers’ supply chain relationships affect banks’ lending decisions. These relationships benefit firms by reducing the information gap with banks, which increases the access to capital, while reducing the cost of the loan. However, banks demand increased intensity of covenants and greater use of collateral when the correlation of cash flows among firms in the supply chain is high. Longer relationships between the borrower and its supply chain partner, and between the bank and the borrower’s supply chain partner, mitigate lending constraints. The evidence suggests supply chains serve as an informational bridge between lenders and borrowers.

Keywords: Supply Chain, Bank Loans

JEL Classification: G21, G30

Suggested Citation

Hasan, Iftekhar and Minnick, Kristina and Raman, Kartik, Supply Chain Characteristics and Bank Lending Decisions (March 29, 2017). Available at SSRN: https://ssrn.com/abstract=2942762 or http://dx.doi.org/10.2139/ssrn.2942762

Iftekhar Hasan

Fordham University ( email )

45 COLUMBUS AVENUE
GBA-5TH FLOOR
NEW YORK, NY 10023
United States

Bank of Finland ( email )

P.O. Box 160
Helsinki 00101
Finland

University of Sydney ( email )

P.O. Box H58
Sydney, NSW 2006
Australia

Kristina Minnick (Contact Author)

Bentley University ( email )

175 Forest Street
Waltham, MA 02154
United States

HOME PAGE: http://www.profminnick.com/

Kartik Raman

Bentley University ( email )

175 Forest Street
Waltham, MA 02154
United States

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