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: This paper examines the role of relationship lending using a data set on smallfirm finance. The abilities to acquire private information over time about borrower qualityand to use this information in designing debt contracts largely define the unique nature ofcommercial banking. Recently, a theoretical literature on relationship lending has appearedwhich provides predictions about how loan interest rates evolve over the course of abank-borrower relationship. The study focuses on...

Lines of Credit and Relationship Lending in Small Firm Finance