Banks as producers of private information: what is the role of the relationship lender?

Thomas Matthys

Thomas Matthys

What am I doing when I am not working on my PhD?

When I’m not working on my PhD, I go running and cycling, and read up on the latest developments in financial markets.

What is my PhD about?

The aim of my PhD research is to investigate relationship lending through three innovative studies. The first study looks at relationship lending in interbank markets. I investigate whether banks produce private information about other banks during interactions outside the interbank market, which they then use when dealing in the interbank market. The second study examines whether hedge fund activism affects targeted firm’s relationship lending and monitoring costs. Hedge fund activism is a booming phenomenon whereby hedge funds are found to cause major changes in corporate governance that benefit shareholder wealth but adversely affect debtholders. In this study, the role of a target firm’s relationship lender in the event of a hedge fund attack is investigated. Study three considers the impact of relationship lending on firm cash holdings.

Why is this important for practice?

Banks have shown renewed interest in relationship lending and liquidity management after the drying up of the interbank market in 2008. Investigating mechanisms that govern interbank markets is thus relevant for the management of financial institutions. Additionally, we are looking at how relationship lending impacts monitoring effects, which can be directly related to the cost structure of banks. Lastly, the financial crisis has shown that firms that have a relationship lender have a more stable access to financing in bad times compared to firms that do not have a relationship lender. Unravelling the role of the relationship lender can provide valuable information to corporates with regard to corporate financing decisions.

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& Rankings

Equis Association of MBAs AACSB Financial Times Economist Intelligence Unit