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ifo Institut – Leibniz-Institut für Wirtschaftsforschung an der Universität München >
CESifo Working Papers, CESifo Group Munich >
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http://hdl.handle.net/10419/18889
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| Title: | | Multiple but asymmetric bank financing : the case of relationship lending  |
| Authors: | | Elsas, Ralf Heinemann, Frank Tyrell, Marcel |
| Issue Date: | | 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 |
| Appears in Collections: | | CESifo Working Papers, CESifo Group Munich
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