Carletti, Elena (2001) The structure of bank relationships, endogenous monitoring and loan rates. Financial Markets Group Discussion Papers (388). Financial Markets Group, The London School of Economics and Political Science, London, UK.
Full text not available from this repository.Abstract
This paper investigates, in a simple model of overlapping moral hazard problems between banks and firms, how the number of bank relationships affect banks incentives to monitor their borrrowers and how, in turn, these decisions affect loan rates and firms choice between single and multiple relationships. The analysis shows that multiple lenders monitor less than a single lender. This is because they face duplication of effort and sharing of benefits in monitoring. However, as a consequence of diseconomies of scale in monitoring, multiple lenders do not necessarily require a higher loan rate. The firms choice between single and multiple relationships is not univocal, depending on the relative severity of bank moral hazard as compared to firm moral hazard.
| Item Type: | Monograph (Discussion Paper) |
|---|---|
| Official URL: | https://www.fmg.ac.uk/ |
| Additional Information: | © 2001 The Author |
| Divisions: | Financial Markets Group |
| Subjects: | H Social Sciences > HG Finance H Social Sciences > HB Economic Theory |
| JEL classification: | C - Mathematical and Quantitative Methods > C7 - Game Theory and Bargaining Theory > C72 - Noncooperative Games D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D82 - Asymmetric and Private Information G - Financial Economics > G2 - Financial Institutions and Services > G21 - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages G - Financial Economics > G3 - Corporate Finance and Governance > G32 - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure |
| Date Deposited: | 28 Aug 2009 15:33 |
| Last Modified: | 15 Sep 2023 22:50 |
| URI: | http://eprints.lse.ac.uk/id/eprint/25064 |
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