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Better borrowers, fewer banks?

Author

Listed:
  • Christophe J. GODLEWSKI

    (LaRGE Research Center, Université de Strasbourg)

  • Frédéric Lobez

    (European Center for Corporate Control Studies, Université de Lille Nord de France)

  • Jean-Christophe Statnik

    (European Center for Corporate Control Studies, Université de Lille Nord de France
    GREGOR, Sorbonne Graduate Business School, Université Paris 1)

Abstract

We investigate the relationship between borrower quality and the structure of the pool of banks. First, we develop a theoretical model where the size of the banking pool is a credible signal of firm quality. We argue that better borrowers seek to disclose their quality in a credible way through the structure of the banking pool involving fewer banks. Second, we test our prediction using a sample of more than 3,000 loans from 19 European countries. We perform regressions of the number of bank lenders on various proxies of borrower quality. Our empirical tests corroborate the theoretical redictions. The size of the banking pool is a signal of borrower quality. Hence, good quality firms have fewer lenders in their banking pools.

Suggested Citation

  • Christophe J. GODLEWSKI & Frédéric Lobez & Jean-Christophe Statnik, 2010. "Better borrowers, fewer banks?," Working Papers of LaRGE Research Center 2010-02, Laboratoire de Recherche en Gestion et Economie (LaRGE), Université de Strasbourg.
    • Handle: RePEc:lar:wpaper:2010-02
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    File URL: http://ifs.u-strasbg.fr/large/publications/2010/2010-02.pdf
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    Citations

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    Cited by:

    1. Christophe J. GODLEWSKI, 2012. "Are bank loans still “special” (especially during a crisis)? Empirical evidence from a European country," Working Papers of LaRGE Research Center 2012-03, Laboratoire de Recherche en Gestion et Economie (LaRGE), Université de Strasbourg.
    2. Angelo Baglioni & Luca Colombo & Paola Rossi, 2018. "Debt restructuring with multiple bank relationships," Temi di discussione (Economic working papers) 1191, Bank of Italy, Economic Research and International Relations Area.

    More about this item

    Keywords

    Bank lending; borrower quality; multiple banking; number of lenders; signaling; Europe.;
    All these keywords.

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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