Abstract

DISRUPTED LENDING RELATIONSHIP AND BORROWER'S STRATEGIC DEFAULT: EVIDENCE FROM THE TOURISM INDUSTRY DURING THE GREEK ECONOMIC CRISIS

Panagiotis Avramidis

Alba Graduate Business School, The American College of Greece

 

Ioannis Asimakopoulos

Bank of Greece

 

Dimitris Malliaropulos  

Bank of Greece and University of Piraeus

 

Abstract

Using a sample of bank loans to firms operating in the tourism industry for the period 2010-2015, and regional variation of tourism activities to identify the strategic defaulted firms, we examine the impact of Greek banks consolidation on the firms’ payment behavior. We show that a merger-induced impairment of the lending relationship is related to a higher likelihood of strategic default by the target bank’s borrowers. In contrast, mergers with a limited impact on the lending relationship have no effect on the probability of strategic default of target bank’s borrowers. The results highlight the importance of relationship lending benefits in strategic default decisions. Our findings are robust to the alternative interpretation of soft budget constraints.

JEL-classification: G21, G32, G33

Keywords: Bank consolidation, strategic default, lending relationship.

 

Acknowledgements: We want to thank Nikos Artavanis and Antonis Kotidis for helpful suggestions and comments. The views expressed in this paper are those of the authors and not necessarily those of the Bank of Greece, the ECB or the Eurosystem.

 

Correspondence:

Dimitris Malliaropulos

Economic Analysis and Research Department, Bank of Greece,

21 El. Venizelos Av., 10250

Athens, Greece

Tel.:0030-210-3202380

Fax: 0030-210-3203939

Email: dmalliaropulos@bankofgreece.gr


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