Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/18889
Authors: 
Elsas, Ralf
Heinemann, Frank
Tyrell, Marcel
Year of Publication: 
2004
Series/Report no.: 
CESifo working papers 1251
Abstract: 
Empirical evidence suggests that even those firms presumably most in need of monitoringintensive financing (young, small, and innovative firms) have a multitude of bank lenders, where one may be special in the sense of relationship lending. However, theory does not tell us a lot about the economic rationale for relationship lending in the context of multiple bank financing. To fill this gap, we analyze the optimal debt structure in a model that allows for multiple but asymmetric bank financing. The optimal debt structure balances the risk of lender coordination failure from multiple lending and the bargaining power of a pivotal relationship bank. We show that firms with low expected cash-flows or low interim liquidation values of assets prefer asymmetric financing, while firms with high expected cash-flow or high interim liquidation values of assets tend to finance without a relationship bank.
Subjects: 
relationship lending
multiple bank financing
lender coordination
JEL: 
G21
G78
G33
Document Type: 
Working Paper

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