The Importance of Being Consulted
AbstractDoes management consulting facilitate the access to credit for start-ups? This paper tries to answer the question by developing a theoretical framework where a firm applies for a bank loan to implement a risky project. The probability of success increases if the firm exerts a costly managerial extra-effort, but the bank is unable to observe such an effort: a moral hazard problem may therefore occur. During an economic downturn the project's expected profitability is likely to be low relatively to the effort cost. In this case we find that credit is granted only if the bank hires a management consultant, even when the latter does not improve the business practice.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by Society for AEF in its journal Annals of Economics and Finance.
Volume (Year): 11 (2010)
Issue (Month): 2 (November)
Management consultancy; Moral hazard; Bank credit; Economic downturn;
Other versions of this item:
- M11 - Business Administration and Business Economics; Marketing; Accounting - - Business Administration - - - Production Management
- M13 - Business Administration and Business Economics; Marketing; Accounting - - Business Administration - - - New Firms; Startups
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Chiara Dalle Nogare & Matteo M Galizzi, 2008.
"The Political Economy of Cultural Spending: Evidence from Italian Cities,"
0818, University of Brescia, Department of Economics.
- Chiara Dalle Nogare & Matteo Galizzi, 2011. "The political economy of cultural spending: evidence from Italian cities," Journal of Cultural Economics, Springer, vol. 35(3), pages 203-231, August.
- Boot, Arnoud W A & Thakor, Anjan, 1997.
"Can Relationship Banking Survive Competition?,"
CEPR Discussion Papers
1592, C.E.P.R. Discussion Papers.
- Kay Mitusch & Roland Strausz, . "Mediators and Mechanism Design: Why Firms Hire Consultants," Papers 005, Departmental Working Papers.
- A. Fedele & A. Mantovani, 2004.
"Complementarity, Coordination and Credit,"
502, Dipartimento Scienze Economiche, Universita' di Bologna.
- Alessandro Fedele & Andrea Mantovani, 2008. "Complementarity, Coordination, and Credit," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 164(2), pages 230-253, June.
- Del Boca, Alessandra & Fratianni, Michele & Spinelli, Franco & Trecroci, Carmine, 2010.
"The Phillips curve and the Italian lira, 1861-1998,"
The North American Journal of Economics and Finance,
Elsevier, vol. 21(2), pages 182-197, August.
- Alessandra Del Boca & Michele Fratianni & Franco Spinelli & Carmine Trecroci, 2008. "The Phillips Curve and the Italian Lira, 1861-1998," Working Papers 2008-05, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy.
- Alessandra Del Boca & Michele Fratianni & Franco Spinelli & Carmine Trecroci, 2009. "The Phillips curve and the Italian lira, 1861-1998," Working Papers 0908, University of Brescia, Department of Economics.
- Alessandra Del Boca & Michele Fratianni & Franco Spinelli & Carmine Trecroci, 2008. "The Phillips Curve and the Italian Lira, 1861-1998," Mo.Fi.R. Working Papers 8, Money and Finance Research group (Mo.Fi.R.) - Univ. Politecnica Marche - Dept. Economic and Social Sciences.
- Nancy Huyghebaert & Linda M. Van de Gucht, 2007. "The Determinants of Financial Structure: New Insights from Business Start-ups," European Financial Management, European Financial Management Association, vol. 13(1), pages 101-133.
- Forges, F., 1984.
"An approach to communication equilibria,"
CORE Discussion Papers
1984035, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Amit, Raphael & Brander, James & Zott, Christoph, 1998. "Why do venture capital firms exist? theory and canadian evidence," Journal of Business Venturing, Elsevier, vol. 13(6), pages 441-466, November.
- Timothy Clark & Iain Mangham, 2004. "From Dramaturgy to Theatre as Technology: The Case of Corporate Theatre," Journal of Management Studies, Wiley Blackwell, vol. 41(1), pages 37-59, 01.
- Klein, Benjamin & Leffler, Keith B, 1981. "The Role of Market Forces in Assuring Contractual Performance," Journal of Political Economy, University of Chicago Press, vol. 89(4), pages 615-41, August.
- Winand Emons, 1997.
"Credence Goods and Fraudelent Experts,"
RAND Journal of Economics,
The RAND Corporation, vol. 28(1), pages 107-119, Spring.
- Thomas Armbrüster, 2004. "Rationality and Its Symbols: Signalling Effects and Subjectification in Management Consulting," Journal of Management Studies, Wiley Blackwell, vol. 41(8), pages 1247-1269, December.
- Martin Meier & Enrico Minelli & Herakles Polemarchakis, 2014.
"Competitive markets with private information on both sides,"
Springer, vol. 55(2), pages 257-280, February.
- Martin Meier & Enrico Minelli & Herakles Polemarchakis, 2009. "Competitive Markets with Private Information on Both Sides," Working Papers 0917, University of Brescia, Department of Economics.
- Dominique Demougin & Oliver Fabel, 2007. "Entrepreneurship and the Division of Ownership in New Ventures," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 16(1), pages 111-128, 03.
- Robin Fincham, 1999. "The Consultant-Client Relationship: Critical Perspectives on the Management of Organizational Change," Journal of Management Studies, Wiley Blackwell, vol. 36(3), pages 335-351, 05.
- Boot, Arnoud W. A., 2000. "Relationship Banking: What Do We Know?," Journal of Financial Intermediation, Elsevier, vol. 9(1), pages 7-25, January.
- Laura Levaggi & Rosella Levaggi, 2007. "Regulation Strategies for Public Service Provision," Working Papers 0707, University of Brescia, Department of Economics.
- Darby, Michael R & Karni, Edi, 1973. "Free Competition and the Optimal Amount of Fraud," Journal of Law and Economics, University of Chicago Press, vol. 16(1), pages 67-88, April.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Qiang Gao).
If references are entirely missing, you can add them using this form.