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Hold-up in multiple banking: evidence from SME lending

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  • Antje Brunner
  • Jan Pieter Krahnen

Abstract

This paper analyses loan pricing on short-term lines of credit with an emphasis on situations of borrower distress. Based on a unique data set on SME lending collected from major German banks, we find effective coordination among multiple bank lenders when there is borrower distress. The panel estimation distinguishes between rents to a single bank lender and rents that accrue due to the elimination of competition among multiple lenders. We find relationship lending in terms of duration and housebanking to have no discernible impact on the loan spread. Thus, contrary to predictions in the theoretical literature, multiple lending does not necessarily insure the borrower against hold-up.

Suggested Citation

  • Antje Brunner & Jan Pieter Krahnen, 2013. "Hold-up in multiple banking: evidence from SME lending," International Journal of Banking, Accounting and Finance, Inderscience Enterprises Ltd, vol. 5(1/2), pages 78-101.
  • Handle: RePEc:ids:injbaf:v:5:y:2013:i:1/2:p:78-101
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    Cited by:

    1. Behn, Markus Wilhelm & Haselmann, Rainer & Vig, Vikrant, 2014. "The limits of model-based regulation," IMFS Working Paper Series 82, Goethe University Frankfurt, Institute for Monetary and Financial Stability (IMFS).
    2. repec:wsi:serxxx:v:62:y:2017:i:01:n:s0217590816500247 is not listed on IDEAS

    More about this item

    Keywords

    German banks; credit spread; borrower distress; lender coordination; hold-up; multiple bank lenders; banking industry; SME lending; SMEs; small and medium-size enterprises; Germany; multiple lending.;

    JEL classification:

    • D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances; Revolutions
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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