Economic theory postulates that the characteristics of firms and banks determine the formation of credit relationships. Empirical analysis shows, for example, that larger and more capitalized banks and lower risk firms are more likely to establish credit relationships.

The same characteristics of firms and banks lead to the establishment of different credit relationships when they arise in “normal” periods or in periods of financial crisis (during which new relationships are “imperfect”). The lower quality of the relationships formed during the financial crisis is a measure of firms’ difficulties in accessing credit markets in this period. During the last financial crisis, the quality of bank-firm relationships deteriorated strongly for small firms, but remained relatively stable for large firms.

For more details, see Farinha, Kokas, Sette e Tsoukas (2022), “Real effects of imperfect bank-firm matching”, Banco de Portugal WP 202210.

Prepared by Luísa Farinha. The analyses, opinions and findings expressed above represent the views of the author and not necessarily those of Banco de Portugal or the Eurosystem.

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