Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/27850
Authors: 
Bannier, Christina E.
Year of Publication: 
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: 
Document Type: 
Working Paper

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