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http://hdl.handle.net/10419/27850
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| Title: | | Heterogeneous multiple bank financing: does it reduce inefficient credit-renegotation incidences?  |
| Authors: | | Bannier, Christina E. |
| Issue Date: | | 2007 |
| Series/Report no.: | | Working paper series // Frankfurt School of Finance & Management 83 |
| Abstract: | | Small and medium-sized firms often obtain capital via a mixture of relationship and arm's-length bank lending. We show that such heterogeneous multiple bank financing leads to a lower probability of ineefficient credit foreclosure than both monopoly relationship lending and homogeneous multiple bank financing. Yet, in order to reduce hold-up and coordination-failure risk, the relationship bank's fraction of total firm debt must not become too large. For firms with intermediate expected profits, the probability of ineefficient credit-renegotiation is shown to decrease along with the relationship bank's information precision. For firms with extremely high or extremely low expected returns, however, it increases. |
| Subjects: | | Relationship lending asymmetric information financial distress hold-up coordination failure |
| JEL: | | D82 G21 L14 |
| Persistent Identifier of the first edition: | | urn:nbn:de:101:1-20080827321 |
| Document Type: | | Working Paper |
| Appears in Collections: | | Frankfurt School - Working Paper Series, Frankfurt School of Finance and Management
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