MULTIPLE BANKING RELATIONSHIPS: COMPETITION AMONG "INSIDE" BANKS

Angelo Stefano Baglioni, 32364, Area 13 - Scienze economiche e statistiche, FINANZIARIE E ASSICURATIVE FACOLTA' DI SCIENZE BANCARIE, MILANO - Dipartimento di Economia e finanza, FINANZIARIE E ASSICURATIVE FACOLTA' DI SCIENZE BANCARIE

Risultato della ricerca: Contributo in rivistaArticolo in rivistapeer review

Abstract

Why firms apply for credit at several banks? The model presented here provides an answer, based on the customer relationships approach. A bank makes an initial investment in information production on a borrowing firm; such an investment must later be compensated: the firm has to share its profits (if any) with the bank. The bank may be able to impose this sharing, when the firm asks for the roll-over of a short term loan, thanks to the informational advantage she has over other lenders; but this "informational rent" lowers the firm owner's incentives to exert effort. Therefore, the firm needs a way to minimize such a rent: this may be done by applying for credit at more than one bank, thus building up competition among "inside" (informed) banks. On the other hand, it is crucial that this competition does not drive the informational rent to zero: in such a case, no bank would be willing to lend. The alternative of a long term loan is also examined, showing that it creates some incentive distortion as well.
Lingua originaleEnglish
pagine (da-a)165-196
Numero di pagine32
RivistaRIVISTA ITALIANA DEGLI ECONOMISTI
Volume7
DOI
Stato di pubblicazionePubblicato - 2002

Keywords

  • banks

Fingerprint

Entra nei temi di ricerca di 'MULTIPLE BANKING RELATIONSHIPS: COMPETITION AMONG "INSIDE" BANKS'. Insieme formano una fingerprint unica.

Cita questo