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Empirical Determinants of Bargaining Power

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  • Hirofumi Uchida

Abstract

This paper empirically investigates what determine bargaining power between a lender and a borrower who have continuing transactional relationships. Bargaining power is proxied by which side of the transaction, i.e. the lender or the borrower, usually incurs a shoe-leather cost when they have contact. The proxy is regressed on three types of variables that can potentially determine distribution: (i) lender's competition, (ii) the degree of informational asymmetry between the two parties, and (iii) borrower performance. Consistent with theoretical predictions, we find that intensive lender competition and borrowers' good performance increase the likelihood of the lender incurring the cost, or the borrower's power. We also obtain evidence suggesting that some lenders enjoy a status of informational monopoly and capture borrowers.

Suggested Citation

  • Hirofumi Uchida, 2006. "Empirical Determinants of Bargaining Power," Discussion papers 06030, Research Institute of Economy, Trade and Industry (RIETI).
    • Handle: RePEc:eti:dpaper:06030
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    References listed on IDEAS

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    5. Kano, Masaji & Uchida, Hirofumi & Udell, Gregory F. & Watanabe, Wako, 2011. "Information verifiability, bank organization, bank competition and bank-borrower relationships," Journal of Banking & Finance, Elsevier, vol. 35(4), pages 935-954, April.
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    Cited by:

    1. Kirschenmann, K., 2010. "The Dynamics in Requested and Granted Loan Terms when Bank and Borrower Interact Repeatedly," Other publications TiSEM 40d5005c-1626-4511-aa8a-f, Tilburg University, School of Economics and Management.
    2. Jens Grunert & Lars Norden, 2012. "Bargaining power and information in SME lending," Small Business Economics, Springer, vol. 39(2), pages 401-417, September.
    3. Kirschenmann, K., 2010. "The Dynamics in Requested and Granted Loan Terms when Bank and Borrower Interact Repeatedly," Discussion Paper 2010-63, Tilburg University, Center for Economic Research.
    4. Guo, Chenhao & Ke, Yun & Zhang, Jinkang, 2023. "Digital transformation along the supply chain," Pacific-Basin Finance Journal, Elsevier, vol. 80(C).
    5. Kirschenmann, K., 2010. "The Dynamics in Requested and Granted Loan Terms when Bank and Borrower Interact Repeatedly," Other publications TiSEM 300df022-4701-4773-a8b7-c, Tilburg University, School of Economics and Management.

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