A Century of British Firm - Bank Relationships: Why the Transition to Multiple Banking?

We study how relationships between firms and banks evolved between during the Twentieth century in Britain and we relate it to firms’ borrowing policies and leverage ratios. We document and explain a remarkable transition from single to multiple firm-bank relationships during the last twenty years of the sample period. Larger, global, or transparent companies with greater needs for bank credit and specialized services were more likely to add a bank.
Deregulation and intensifying competition in the banking sector during the 1970s spurred banks to supply credit and services through these multilateral arrangements. Firms that add a bank following deregulation borrow more than similar firms that do not add a bank, and their bank debt expands while their trade (and other) credit contracts.

Fabio Braggion is associate professor of Finance at Tilburg University, EBC and CentER fellow. His research interests include financial history, corporate finance and international macroeconomics.

Fabio obtained a Ph.D. in Economics at Northwestern University. He has been teaching courses in corporate finance and financial history.