Journal article

Authors list: Bannier, CE

Publication year: 2007

Pages: 445-470

Journal: Financial Markets and Portfolio Management

Volume number: 21

Issue number: 4

DOI Link: https://doi.org/10.1007/s11408-007-0062-6

Publisher: Springer

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 inefficient 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 inefficient 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.

Harvard Citation style: Bannier, C. (2007) Heterogeneous multiple bank financing: does it reduce inefficient credit-renegotiation incidences?, Financial Markets and Portfolio Management, 21(4), pp. 445-470. https://doi.org/10.1007/s11408-007-0062-6

APA Citation style: Bannier, C. (2007). Heterogeneous multiple bank financing: does it reduce inefficient credit-renegotiation incidences?. Financial Markets and Portfolio Management. 21(4), 445-470. https://doi.org/10.1007/s11408-007-0062-6