A theory of the optimal number of banking relationships is developed and tested using matched bank-firm data. According to the theory banks may be unable to continue funding profitable projects owing to internal problems and a firm may thus have to refinance from nonrelationship banks. The latter, however, face an adverse selection problem, as they do not know the quality of the project, and may refuse to lend. In these circumstances, multiple banking may reduce the probability of an early liquidation of the project. The empirical evidence supports the predictions of the model

Multiple versus single banking relationships : theory and evidence / E. Detragiache, P.G. Garella, L. Guiso. - In: THE JOURNAL OF FINANCE. - ISSN 0022-1082. - 55:3(2000 Jun 01), pp. 1133-1161.

Multiple versus single banking relationships : theory and evidence

P.G. Garella
Secondo
;
2000

Abstract

A theory of the optimal number of banking relationships is developed and tested using matched bank-firm data. According to the theory banks may be unable to continue funding profitable projects owing to internal problems and a firm may thus have to refinance from nonrelationship banks. The latter, however, face an adverse selection problem, as they do not know the quality of the project, and may refuse to lend. In these circumstances, multiple banking may reduce the probability of an early liquidation of the project. The empirical evidence supports the predictions of the model
Credit markets ; Relationship banking ; Adverse selection ; Liquidation ; Italian banking sector
1-giu-2000
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/2434/43852
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