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Collective relationship banking and private information monitoring in Korea

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  • Yoonhee Tina Chang

Abstract

This paper introduces the notion of collective relationship banking (CRB) as a mechanism for monitoring private information and characterizes the probability of such a banking relationship existing when the borrowing firms have heterogeneous vertical ownership structures. Using a Korean firm-level panel dataset, the empirical results of the paper suggest that firms with smaller holding companies' ownership stakes are more likely to choose CRB. This can be explained in terms of CRB as a means to overcome informational asymmetries as holding companies can provide indirect monitoring. The paper then addresses policy concerns associated with corporate restructuring which may create a more concentrated banking relationship with a few dominant banks. Copyright (c) 2007 The Author Journal compilation (c) 2007 The European Bank for Reconstruction and Development. .

Suggested Citation

  • Yoonhee Tina Chang, 2007. "Collective relationship banking and private information monitoring in Korea," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 15, pages 483-504, July.
  • Handle: RePEc:bla:etrans:v:15:y:2007:i::p:483-504
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    References listed on IDEAS

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    1. Cerasi, Vittoria & Daltung, Sonja, 2001. "Diversification and Delegation in Firms," Working Paper Series 131, Sveriges Riksbank (Central Bank of Sweden).
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    More about this item

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L59 - Industrial Organization - - Regulation and Industrial Policy - - - Other

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