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This paper analyses the impact of the intensity and duration of bankfirm relationship on Tunisian loan quality over the period 2012-2018. Estimating a panel ordered probit model, our results indicate that the impact of relationship lending (in the form of duration and intensity) on loan quality is different according the firm's profitability level. The intensity of
the relationship lending positively (negatively) impacts the loans of high (average or low) quality. When intersecting intensity of a banking relationship with firm balance sheet indicators, the link between the intensity of the bank-firm relationship and loan quality is lower (higher) for good (low) quality firms. In addition, the length of the bank-firm relationship increases the probability of poor quality loans. These results show that perverse and opportunist effects, in the form of strong moral hazard, are persistent for firms at different level of profitability.
