Federal Deposit InsuranceCorporation• Center for Financial Researchh
Sanjiv R. Das
Darrell Duffie
Nikunj Kapadia
Risk-Based Capital Standards,
Deposit Insurance and Procyclicality
Risk-Based Capital Standards,
Deposit Insurance and Procyclicality
FDIC Center for Financial Research
Working Paper
No. 2005-08
Relationship Lending, Accounting Disclosure, and
Credit Availability during the Asian Financial Crisis
Wenying Jiangli
Haluk Unal
Chiwon Yom
June 2005
Sanjiv R. Das
Darrell Duffie
Nikunj Kapadia
Risk-Based Capital Standards,
Deposit Insurance and Procyclicality
Risk-Based Capital Standards,
Deposit Insurance and Procyclicality
FDIC Center for Financial Research
Working Paper
No. 2005-08
Relationship Lending, Accounting Disclosure, and
Credit Availability during the Asian Financial Crisis
Wenying Jiangli
Haluk Unal
Chiwon Yom
June 2005
1
Relationship Lending, Accounting Disclosure,
and Credit Availability during the Asian Financial Crisis∗
by
Wenying Jiangli*
Haluk Unal**
Chiwon Yom*
September 2006
FDIC Center for Financial Research Working paper
Abstract
We examine whether lending relationships benefit firms by making credit more available
during periods of financial stress. Our main finding is that during the Asian financial crisis of
July 1997 through the end of1998, relationship lending increased the likelihood that Korean and
Thai firms would obtain credit but it had no effect on Indonesian and Philippine firms. We ask if
accounting disclosure might explain the observed differences among the three countries for
which audit information is available. We find that for Indonesian firms with weak lending
relationships, banks replace relationship lending technology with a financial-statement lending
technology. Such a result does not hold for Korean and Philippine firms.
Key Words: relationship lending, accounting disclosure, credit availability
∗Senior Financial Economist at the Federal Deposit Insurance Corporation (FDIC). E-mail:
wjiangli@fdic.gov, phone: 202-898-6537, fax: 202-898-8636. ∗ Senior Financial Economist at
theFDIC. E-mail: cyom@fdic.gov, phone: 202-898-3720, fax: 202-898-8636. ** University of
Maryland and Center for Financial Research, FDIC. E-mail: hunal@rhsmith.umd.edu, phone:
301-405-2256. The views expressed here are those of the authors and do not necessarily reflect
the views of the Federal Deposit Insurance Corporation. We appreciate the comments of
Rosalind Bennett, Ralf Elsas, Mark Flannery, Reint Gropp, Robert Hauswald, Paul Kupiec, Dan
Nuxoll, John O’Keefe, Jack Reidhill, Katherine Samolyk, and participants in workshops or
seminars at the following venues: the FDIC; American University; the 2004 workshop hosted
jointly by the Basel Committee on Banking Supervision, the Centre for Economic Policy
Research (CEPR), and the Journal of Financial Intermediation; the 2004 meetings of the Western
Economics Association, the Financial Management Association, and the Southern Finance
Association; and the 2005 Federal Reserve Bank of Chicago Bank Structure and Competition
meeting. Sarah Junker provided research assistance. All errors are our own.
Relationship Lending, Accounting Disclosure,
and Credit Availability during the Asian Financial Crisis∗
by
Wenying Jiangli*
Haluk Unal**
Chiwon Yom*
September 2006
FDIC Center for Financial Research Working paper
Abstract
We examine whether lending relationships benefit firms by making credit more available
during periods of financial stress. Our main finding is that during the Asian financial crisis of
July 1997 through the end of1998, relationship lending increased the likelihood that Korean and
Thai firms would obtain credit but it had no effect on Indonesian and Philippine firms. We ask if
accounting disclosure might explain the observed differences among the three countries for
which audit information is available. We find that for Indonesian firms with weak lending
relationships, banks replace relationship lending technology with a financial-statement lending
technology. Such a result does not hold for Korean and Philippine firms.
Key Words: relationship lending, accounting disclosure, credit availability
∗Senior Financial Economist at the Federal Deposit Insurance Corporation (FDIC). E-mail:
wjiangli@fdic.gov, phone: 202-898-6537, fax: 202-898-8636. ∗ Senior Financial Economist at
theFDIC. E-mail: cyom@fdic.gov, phone: 202-898-3720, fax: 202-898-8636. ** University of
Maryland and Center for Financial Research, FDIC. E-mail: hunal@rhsmith.umd.edu, phone:
301-405-2256. The views expressed here are those of the authors and do not necessarily reflect
the views of the Federal Deposit Insurance Corporation. We appreciate the comments of
Rosalind Bennett, Ralf Elsas, Mark Flannery, Reint Gropp, Robert Hauswald, Paul Kupiec, Dan
Nuxoll, John O’Keefe, Jack Reidhill, Katherine Samolyk, and participants in workshops or
seminars at the following venues: the FDIC; American University; the 2004 workshop hosted
jointly by the Basel Committee on Banking Supervision, the Centre for Economic Policy
Research (CEPR), and the Journal of Financial Intermediation; the 2004 meetings of the Western
Economics Association, the Financial Management Association, and the Southern Finance
Association; and the 2005 Federal Reserve Bank of Chicago Bank Structure and Competition
meeting. Sarah Junker provided research assistance. All errors are our own.