Abstract - When do companies choose relationship lenders, when do they switch?

This study analyses when companies borrow mainly from one bank and when companies
change their main lender. We find that small, young and R&D-intensive
firms concentrate their borrowing on one bank. Moreover, small companies tend
to have long-term stable relationships, while, in contrast, young companies change
their main lender more frequently than old companies. High-quality borrowers are
more likely to concentrate their borrowing on one bank, but also change their main
lender more often. Besides, our evidence suggests that companies concentrate their
borrowing on banks with a high share of core deposits which are less exposed to liquidity
problems. Moreover, relationships with such banks tend to continue longer.
Overall, the degree of concentration and duration seem to play different roles in
lending relationships. If the relationship with the main lender has already lasted
for several years, the borrower reduces the main lender's share with each additional
year of the relationship, thereby deceasing the risk of a hold-up by the relationship
lender.

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