Economics in a picture

In Portugal, more than half of the firms do not have any bank relationship. When firms borrow from banks, they hold 2 bank relationships on average. The smaller firms rely on less banks than the larger ones. Large firms have on average six different bank relationships, while micro firms, that employ less than 10 employees, usually have only one bank relationship. 

There is also evidence that when firms gain access to bank loans for the first time, they usually establish a single bank relationship. As time goes by and the firm expands its activity, the likelihood of establishing relationships with other banks increases. 

For further details see Diana Bonfim, Qinglei Dai and Francesco Franco (2018), The number of bank relationships and borrowing costs: the role of information asymmetries, Journal of Empirical Finance, 2018, 46, 191-209 (a previous version can be found in Diana Bonfim, Qinglei Dai and Francesco Franco (2009), The Number of Bank Relationships, Borrowing Costs and Bank Competition, Banco de Portugal Working Paper 12/2009).

Prepared by Diana Bonfim and Sujiao Zhao. The analyses, opinions and findings expressed above represent the views of the authors and not necessarily those of Banco de Portugal or the Eurosystem.

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