English, Article, Journal or magazine article edition: Banking Relations, Competition and Research Incentives Thomas Gehrig

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Bookmark: http://trove.nla.gov.au/version/190138
Physical Description
  • preprint
Language
  • English

Edition details

Title
  • Banking Relations, Competition and Research Incentives
Author
  • Thomas Gehrig
Physical Description
  • preprint
Notes
  • When banks incur sunk costs to provide ex-ante information about customers, exclusive banking relations will occur under intense price competition when monitoring costs are low. When monitoring costs are sufficiently high, only non-monitored finance will be provided, typically, by multiple lenders. While multiple lending generally is (second-best) efficient when it emerges, relationship lending typically is not. In our framework, the informational rents in relationships of a single financier (house bank) typically exceed the risk premium required for financing projects from the unscreened pool of applicants. Accordingly, when entrepreneurs can affect repayment probabilities by sunk ex-ante investments prior to the financing stage, in a house bank regime investment incentives are typically lower than under conditions of competitive non-monitored lending.
  • relationship banking, multiple lending, monitoring, research incentives
  • RePEc:wop:pennin:00-14
Language
  • English
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