Empirical evidence of banking relationships for Spanish SMEs

Theoretical papers on banking relationships have focused on how the strength of a bank–firm relationship affects the design of credit agreements. In empirical studies, the number of bank relationships has been often used as a proxy for the strength of the bank–firm relationship. Any analysis of bank–firm relationships must also include a study of the reasons why a particular
bank is selected. This means identifying the most significant decision-making variables concerned
with such contracting. In this article, we examine the determinants of the number of banking
relationships and the factors that influence the choice of banks in a sample of small and mediumsized firms. The reference to SME firms is very useful, since SMEs are highly dependent on banking finance to undertake their projects. The results provide some evidence in support of the idea that, for SMEs, the size of the firm, age, leverage and financial cost have significant links with the number of banking relationships. On the other hand, the results confirm the tendency for qualitative aspects to become determining factors in the choice of financial institutions.