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The Structure of Multiple Credit Relationships: Evidence from US Firms


  • Luigi Guiso
  • Raoul Minetti


When firms borrow from multiple concentrated creditors such as banks they appear to differentiate their allocation of borrowing. In this paper, we put forward hypotheses for this borrowing pattern based on incomplete contract theories and test them using a sample of small U.S. firms. We find that firms with more valuable, more redeployable, and more homogeneous assets differentiate borrowing more sharply across their concentrated creditors. We also find that borrowing differentiation is inversely related to restructuring costs and positively related to firms’ informational transparency. This evidence supports the predictions of incomplete contract theories: the structure of credit relationships appears to be used as a device to discipline creditors and entrepreneurs, especially during corporate reorganizations.

Suggested Citation

  • Luigi Guiso & Raoul Minetti, 2007. "The Structure of Multiple Credit Relationships: Evidence from US Firms," Economics Working Papers ECO2007/46, European University Institute.
  • Handle: RePEc:eui:euiwps:eco2007/46

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    References listed on IDEAS

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    Cited by:

    1. Luis Araujo & Raoul Minetti, 2012. "Credit Crunches, Asset Prices and Technological Change," Mo.Fi.R. Working Papers 61, Money and Finance Research group (Mo.Fi.R.) - Univ. Politecnica Marche - Dept. Economic and Social Sciences.
    2. Ongena, Steven & Tümer-Alkan, Günseli & Westernhagen, Natalja v., 2012. "Creditor concentration: An empirical investigation," European Economic Review, Elsevier, vol. 56(4), pages 830-847.
    3. Giorgia Barboni & Tania Treibich, 2013. "First Time Lucky? An Experiment on Single versus Multiple Bank Lending Relationships," GREDEG Working Papers 2013-28, Groupe de REcherche en Droit, Economie, Gestion (GREDEG CNRS), University of Nice Sophia Antipolis.
    4. Carbo-Valverde, Santiago & Degryse, Hans & Rodríguez-Fernández, Francisco, 2015. "The impact of securitization on credit rationing: Empirical evidence," Journal of Financial Stability, Elsevier, vol. 20(C), pages 36-50.
    5. Carletti, Elena & Cerasi, Vittoria & Daltung, Sonja, 2007. "Multiple-bank lending: Diversification and free-riding in monitoring," Journal of Financial Intermediation, Elsevier, vol. 16(3), pages 425-451, July.
    6. OGANE Yuta, 2017. "The Number of Bank Relationships and Bank Lending to New Firms: Evidence from firm-level data in Japan," Discussion papers 17112, Research Institute of Economy, Trade and Industry (RIETI).
    7. Steven Ongena & Yuejuan Yu, 2017. "Firm Industry Affiliation and Multiple Bank Relationships," Journal of Financial Services Research, Springer;Western Finance Association, vol. 51(1), pages 1-17, February.
    8. Yuta Ogane, 2016. "Banking relationship numbers and new business bankruptcies," Small Business Economics, Springer, vol. 46(2), pages 169-185, February.
    9. Giacinto Micucci & Paola Rossi, 2010. "Debt restructuring and the role of lending technologies," Temi di discussione (Economic working papers) 763, Bank of Italy, Economic Research and International Relations Area.
    10. Leandro D’Aurizio & Tommaso Oliviero & Livio Romano, 2012. "Family firms and the agency cost of debt: The role of soft information during a crisis," Economics Working Papers ECO2012/22, European University Institute.
    11. Yu, Y., 2014. "Essays on relationship banking," Other publications TiSEM f3d56b9e-e79e-46c4-bd42-4, Tilburg University, School of Economics and Management.
    12. Vigneron, Ludovic & Hajj Chehade, Hiba, 2013. "Structuration du pool bancaire de la PME : une revue de la littérature
      [Structuring SMEs' banks relationships: a review]
      ," MPRA Paper 50498, University Library of Munich, Germany.
    13. D'Aurizio, Leandro & Oliviero, Tommaso & Romano, Livio, 2015. "Family firms, soft information and bank lending in a financial crisis," Journal of Corporate Finance, Elsevier, vol. 33(C), pages 279-292.
    14. Alexander Karaivanov & Sonia Ruano & Jesús Saurina & Robert Townsend, 2010. "No bank, one bank, several banks: does it matter for investment?," Working Papers 1003, Banco de España;Working Papers Homepage.
    15. Degryse, Hans & Lu, Liping & Ongena, Steven, 2016. "Informal or formal financing? Evidence on the co-funding of Chinese firms," Journal of Financial Intermediation, Elsevier, vol. 27(C), pages 31-50.
    16. Cenni, Stefano & Monferrà, Stefano & Salotti, Valentina & Sangiorgi, Marco & Torluccio, Giuseppe, 2015. "Credit rationing and relationship lending. Does firm size matter?," Journal of Banking & Finance, Elsevier, vol. 53(C), pages 249-265.
    17. Giannetti, Caterina, 2012. "Relationship lending and firm innovativeness," Journal of Empirical Finance, Elsevier, vol. 19(5), pages 762-781.
    18. Giorgia Barboni & Tania Treibich, 2012. "(Just) first time lucky ?the impact of single versus multiple bank lending relationships on firms and banks'behavior," Documents de Travail de l'OFCE 2012-26, Observatoire Francais des Conjonctures Economiques (OFCE).
    19. Ferri, Giovanni & Murro, Pierluigi, 2015. "Do firm–bank ‘odd couples’ exacerbate credit rationing?," Journal of Financial Intermediation, Elsevier, vol. 24(2), pages 231-251.
    20. repec:kap:jfsres:v:51:y:2017:i:3:d:10.1007_s10693-016-0250-5 is not listed on IDEAS
    21. Dong Xiang & Andrew C. Worthington & Helen Higgs, 2011. "Firm-level determinants and impacts of finance-seeking behaviour and outcomes for small and medium-sized enterprises (SMEs) in Australia," Discussion Papers in Finance finance:201115, Griffith University, Department of Accounting, Finance and Economics.
    22. Mary Eschelbach Hansen & Nicolas L. Ziebarth, 2014. "Credit Relationships and Business Bankruptcy During the Great Depression," Working Papers 2014-11, American University, Department of Economics.

    More about this item


    Credit Relationships; Multiple Creditors; Borrowing Allocation;

    JEL classification:

    • 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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