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JOURNAL OF INTERNATIONAL STUDIES


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ISSN: 2306-3483 (Online), 2071-8330 (Print)



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Does bank ownership affect relationship lending: A developing country perspective

Vol. 10, No 1, 2017

 

Ashiqur Rahman

 

Department of Enterprise Economics, Tomas Bata University in Zlin
Czech Republic
rahman@fame.utb.cz

 

 

Does bank ownership affect relationship lending: A developing country perspective

 

Jaroslav Belas

 

Department of Enterprise Economics, Tomas Bata University in Zlin
Czech Republic
belas111@gmail.com
Zoltan Rosza
Department of Management, School of Economics and Management in Public Administration in Bratislava
Slovak Republic
zoltan@rozsa.sk

 

 

Zoltan Rosza

 

Department of Management, School of Economics and Management in Public Administration in Bratislava
Slovak Republic
zoltan@rozsa.sk


Tomas Kliestik

 

University of Zilina
Slovak Republic
tomas.kliestik@fpedas.uniza.sk

 

 

 

Abstract. In this paper we aim to explore how the type of bank ownership - local private banks, government-owned banks (public banks) and foreign banks - can affect relationship lending to small and medium enterprises (SMEs) by using a unique data set from Bangladeshi banking sector. We found that private banks differ from government-owned and foreign banks in terms of relationship lending and credit facilities to SMEs. More specifically, our results suggest that unlike government and foreign banks, private banks do consider soft information from relationship lending while setting up the loan spread to SMEs. We can also confirm that exclusive banking relationship or repeated banking with private banks can soften credit conditions (loan maturity and covenants). Moreover, we found empirical evidence that banking relationship is important for private banks in terms of SME credit risk evaluation. Finally, as according to our expectation, the results confirm that regardless of prior relationship, private banks are more depended on collateral-based lending to SMEs than government-owned or foreign banks.

 

Received: December, 2016

1st Revision: February, 2017

Accepted: April, 2017

 

DOI: 10.14254/2071-8330.2017/10-1/20

 

JEL Classification: G21, L26, O16

Keywords: bank financing, small and medium enterprises, bank ownership, relationship lending, Bangladesh