Bank Ownership, Relationship with Clients and Lending Performance

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This dissertation uses the data collected by the Taiwan’s Joint Credit Information Centre (JCIC) to explore the following topics: bank ownership types and multiple relationships with corporate clients, the impact of information asymmetry and client credit on lending performance, and the impacts of credit rating, ownership, and relationships on loan spread. With regard to topic Ⅰ, we find that banks prefer to have relationships with micro and small businesses (MSBs) that have a high level of information transparency. The more micro-enterprises borrow from private financial holding companies or non-financial holding companies, the more the enterprises develop multiple relationships. The more medium and large businesses (MLBs) borrow from foreign banks, the fewer bank relationships they have. And the more they borrow from private banks, the greater their tendency to build multiple relationships. In topic Ⅱ, MLBs with good information transparency tend to establish relationships with banks that have huge losses from bad debts and credit card lending. However, small foreign firms, and MLBs that have high profitability, cash, and R&D expenditure ratios, prefer to have relationships with banks that have good lending performances and low credit risks. In addition, MLBs and MSBs with poor credit records prefer to have relationships with banks that have good lending performances and low credit risks. In topicⅢ, our results show that private financial holding companies and private non-financial holding companies grant loan spreads significantly lower than those of state-owned banks. Foreign banks grant loan spreads significantly higher than those of state-owned banks. Banks reduce their loan spreads only for high credit risk borrowers with obvious improvements in credit ratings; they do not reduce loan spreads for general borrowers even when the borrowers’ credit ratings improve.