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The impact of private and family firms’ relational strength on financing performance in clusters

Research paper by Hua Song, Lan Wang

Indexed on: 02 Aug '12Published on: 02 Aug '12Published in: Asia Pacific Journal of Management



Abstract

Based on information asymmetry and embeddedness theory, this paper explores how relational strength reduces the information asymmetry between banks and firms and creates a positive relational spillover for the firms in the network to help private and family firms get good financing performance. We empirically verify relational strength enhances financing performance of private and family firms through horizontal information (in terms of horizontal hard information and horizontal soft information). Further, we conduct focused interviews to support empirical results that horizontal information mediates the relationship between relational strength and financing performance. Theoretical and managerial implications are discussed.