HOME » Publications » Economic Review


Vol. 70, No. 2, pp. 146-167 (2019)

“Bank–Firm Relationships and SME Financing: A Literature Review”
Iichiro Uesugi (Institute of Economic Research, Hitotsubashi University)

It is important for firms to establish long-term relationships with banks, especially those facing financial constraints due to limited access to bond and equity markets. Bank–firm relationships are also important in that adverse shocks affecting banks are often transmitted to firms by way of these relationships. The literature has labeled this transmission as one that occurs through the bank lending channel. Against this backdrop, the paper reviews studies that focus on the following three issues pertaining to the bank lending channel: (1) transmission of shocks originating from financial crises through the bank lending channel; (2) the extent that such shocks may be alleviated by close bank–firm relationships; and (3) the transmission of shocks originating from natural disasters, including massive earthquakes.