The “hold-up problem” and banking relationships: evidence from the polish SME sector
The “hold-up problem” and banking relationships: evidence from the polish SME sector

Summary/Abstract: This paper investigates how lender-borrower relationships affect credit cost for small and medium sized companies (SMEs). We use data within the period 2006–2015 for the Polish SME sector and deploy panel regression models to analyse how the number and length of banking relationships influence the financial costs of a random sample of Polish SMEs. We document that the price of capital decreases as relationships progress. Outcomes of the research are thus inconsistent with the“hold-up”hypothesis. Moreover, we find evidence that supports the view that multiple banking relationships generate more financial benefits for companies than a relationship with one lender.

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