The Importance of Being Consulted
Does 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.
References listed on IDEAS
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.:
- 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.
- Kay Mitusch & Roland Strausz, . "Mediators and Mechanism Design: Why Firms Hire Consultants," Papers 005, Departmental Working Papers.
- 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.
- Boot, Arnoud W A & Thakor, Anjan, 1997.
"Can Relationship Banking Survive Competition?,"
CEPR Discussion Papers
1592, C.E.P.R. Discussion Papers.
- 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.
- 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.
- Forges, Francoise M, 1986.
"An Approach to Communication Equilibria,"
Econometric Society, vol. 54(6), pages 1375-85, November.
- F. Forges, 2010. "An Approach to Communication Equilibrium," Levine's Working Paper Archive 516, David K. Levine.
- FORGES, Françoise, . "An approach to communication equilibria," CORE Discussion Papers RP 721, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Forges, F., 1984. "An approach to communication equilibria," CORE Discussion Papers 1984035, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Alessandra Del Boca & Michele Fratianni & Franco Spinelli & Carmine Trecroci, 2008.
"The Phillips Curve and the Italian Lira, 1861-1998,"
2008-05, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy.
- 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," Mo.Fi.R. Working Papers 8, Money and Finance Research group (Mo.Fi.R.) - Univ. Politecnica Marche - Dept. Economic and Social Sciences.
- 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.
- 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.
- Boot, Arnoud W. A., 2000. "Relationship Banking: What Do We Know?," Journal of Financial Intermediation, Elsevier, vol. 9(1), pages 7-25, January.
- Chiara Dalle Nogare & Matteo Galizzi, 2011.
"The political economy of cultural spending: evidence from Italian cities,"
Journal of Cultural Economics,
Springer;The Association for Cultural Economics International, vol. 35(3), pages 203-231, August.
- Chiara Dalle Nogare & Matteo M Galizzi, 2008. "The Political Economy of Cultural Spending: Evidence from Italian Cities," Working Papers 0818, 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.
- Martin Meier & Enrico Minelli & Herakles Polemarchakis, 2014.
"Competitive markets with private information on both sides,"
Springer;Society for the Advancement of Economic Theory (SAET), 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.
- Winand Emons, 1994.
"Credence Goods and Fraudulent Experts,"
dp9402, Universitaet Bern, Departement Volkswirtschaft.
- Laura Levaggi & Rosella Levaggi, 2007. "Regulation Strategies for Public Service Provision," Working Papers 0707, University of Brescia, Department of Economics.
- 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.
- 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.
When requesting a correction, please mention this item's handle: RePEc:cuf:journl:y:2010:v:11:i:2:p:231-245. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Qiang Gao)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.