Heterogeneous multiple bank financing under uncertainty: does it reduce inefficient credit decisions?

  • Small and medium-sized firms typically obtain capital via bank financing. They often rely on a mixture of relationship and arm’s-length banking. This paper explores the reasons for the dominance of heterogeneous multiple banking systems. We show that the incidence of inefficient credit termination and subsequent firm liquidation is contingent on the borrower’s quality and on the relationship bank’s information precision. Generally, heterogeneous multiple banking leads to fewer inefficient credit decisions than monopoly relationship lending or homogeneous multiple banking, provided that the relationship bank’s fraction of total firm debt is not too large.

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Author:Christina E. BannierGND
Parent Title (English):Universität Frankfurt am Main. Fachbereich Wirtschaftswissenschaften: [Working paper series / Finance and accounting] Working paper series, Finance & Accounting ; No. 149
Series (Serial Number):Working paper series / Johann-Wolfgang-Goethe-Universität Frankfurt am Main, Fachbereich Wirtschaftswissenschaften : Finance & Accounting (149)
Publisher:Univ., Fachbereich Wirtschaftswiss.
Place of publication:Frankfurt am Main
Document Type:Working Paper
Year of Completion:2005
Year of first Publication:2005
Publishing Institution:Universitätsbibliothek Johann Christian Senckenberg
Release Date:2005/10/06
Tag:Asymmetric information; Credit market competition; Financial distress; Relationship lending; Uncertainty
GND Keyword:Finanzierungstheorie; Kredit; Bank; Risikomanagement; Entscheidung bei Unsicherheit; Asymmetrische Information; Lieferanten-Kunden-Beziehung; Insolvenz
Page Number:27
Institutes:Wirtschaftswissenschaften / Wirtschaftswissenschaften
Dewey Decimal Classification:3 Sozialwissenschaften / 33 Wirtschaft / 330 Wirtschaft
Licence (German):License LogoDeutsches Urheberrecht