Corporate Loan Duration, Macroeconomic Environments, and Covid-19
42 Pages Posted: 28 Mar 2022
Abstract
This study identifies the relative importance of certain factors in predicting firm–bank relationship termination and investigates the impact of COVID-19-induced macroeconomic shocks on the termination. We perform a nonparametric random survival forests analysis of firm–bank relationship using 2009–2020 data of 1,214,995 unique, bank loan balances of 587,977 Korean corporations. By applying measures of variable importance and time-varying prediction error curves, we find that macroeconomic factors, especially GDP growth rates and average lending rates, are more important in predicting the end of firm–bank relationships than firm- and bank-specific factors, and their importance is further highlighted during the COVID-19 pandemic. We also find that these factors’ contributions in predicting the relationship termination vary over the length of the relationship: for shorter-term relationships (about three years), firm-specific factors are better predictors than macroeconomic factors. This study provides new implications with methodological extensions in firm–bank relationship study.
Keywords: Firm-bank relationship, loan termination, variable importance, macroeconomic factors, random survival forests
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