While many empirical studies document borrower benefits of lending relationships, less is known about lender benefits. A relationship lender's informational advantage over a non-relationship lender may generate a higher probability of selling information-sensitive products to its borrowers. Our results show that the probability of a relationship lender providing a future loan is 42%, while for a non-relationship lender, this probability is 3%. Consistent with theory, we find that borrowers with greater information asymmetries are significantly likely to obtain future loans from their relationship lenders. Relationship lenders are likely to be chosen to provide debt/equity underwriting services, but this effect is economically small.

This paper examines the relation between institutional investor involvement in and the operating performance of large firms. We find a significant relation between a firm’s operating cash flow returns and both the percent of institutional stock ownership and the number of institutional stockholders. However, this relation is found only for a subset of institutional investors: those less likely to have a business relationship with the firm. These results suggest that institutional investors with potential business relations with the firms in which they invest are compromised as monitors of the firm.