Is a friend in need a friend indeed? How relationship borrowers fare during the COVID-19 crisis

Allen N. Berger; Christa H. S. Bouwman; Lars Nordén; Raluca A. Roman; Gregory F. Udell; Teng Wang

doi:10.1016/j.jfi.2025.101150

Journal of Financial Intermediation Vol. 63 2025

Is a friend in need a friend indeed? How relationship borrowers fare during the COVID-19 crisis

Allen N. Berger^1,2; Christa H. S. Bouwman³; Lars Nordén; Raluca A. Roman; Gregory F. Udell; Teng Wang

¹ University of South Carolina · ² Financial Research (Hungary) · ³ European Corporate Governance Institute

Abstract

We challenge the existing relationship lending literature on how banks manage their relationships with corporate borrowers during crises. We test theories of intertemporal smoothing during the closure period of the COVID-19 crisis when borrowers are in great need of relationship benefits. We find that relationship borrowers receive worse rather than more favorable loan contract terms than others during this period. These and other results provide novel evidence on the functioning of relationship lending during a pandemic and contrast existing evidence gleaned from banking and financial crises.

DOI: 10.1016/j.jfi.2025.101150
Volume: 63
Pages: 101150
Language: en
Sources: bibtex:phds-export.bib openalex crossref

Is a friend in need a friend indeed? How relationship borrowers fare during the COVID-19 crisis

Abstract

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