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Game analysis between startup and banks

Author

Listed:
  • Nik Hadiyan Binti Nik Azman

    (Universiti Sains Malaysia, Malaysia Author-2-Name: Zhang Chengzhuo Author-2-Workplace-Name: Universiti Sains Malaysia, Malaysia Author-3-Name: Author-3-Workplace-Name: Author-4-Name: Author-4-Workplace-Name: Author-5-Name: Author-5-Workplace-Name: Author-6-Name: Author-6-Workplace-Name: Author-7-Name: Author-7-Workplace-Name: Author-8-Name: Author-8-Workplace-Name:)

Abstract

" Objective - Due to information asymmetry, banks cannot know all the information about a company during the financing process. Compared to large firms, start-ups face more difficulties in obtaining debt financing. In order to investigate how the game between start-ups and banks maximizes the benefits of debt financing, this study is based on the game process between start-ups and banks in complete and incomplete information markets. Methodology/Technique - The model assumes deterministic and relatively simple financial decisions, and game theory provides a way to gain insight into the mechanistic phenomenon of debt financing for start-ups by allowing for the inclusion of asymmetric information and strategic interactions in the analysis. Finding - The game process of debt financing for start-ups is studied from a game theoretical perspective to reveal the optimal decisions of both parties in the game process under the influence of information asymmetries, i.e., the basic laws governing the operation of debt financing for start-ups and the important criteria and procedures to ensure that debt financing works correctly. Novelty - The study shows that high-quality start-ups are more likely to receive bank loans than low-quality firms that are willing to pay high-interest rates. Type of Paper - Empirical"

Suggested Citation

  • Nik Hadiyan Binti Nik Azman, 2023. "Game analysis between startup and banks," GATR Journals gjbssr631, Global Academy of Training and Research (GATR) Enterprise.
    • Handle: RePEc:gtr:gatrjs:gjbssr631
    DOI: https://doi.org/10.35609/gjbssr.2023.11.1(1)
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    References listed on IDEAS

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    1. Bhattacharya Sudipto & Thakor Anjan V., 1993. "Contemporary Banking Theory," Journal of Financial Intermediation, Elsevier, vol. 3(1), pages 2-50, October.
    2. Franklin Allen & Stephen Morris, 1998. "Finance Applications of Game Theory," Center for Financial Institutions Working Papers 98-23, Wharton School Center for Financial Institutions, University of Pennsylvania.
    3. Jacklin, Charles J & Bhattacharya, Sudipto, 1988. "Distinguishing Panics and Information-Based Bank Runs: Welfare and Policy Implications," Journal of Political Economy, University of Chicago Press, vol. 96(3), pages 568-592, June.
    4. Stiglitz, Joseph E & Weiss, Andrew, 1981. "Credit Rationing in Markets with Imperfect Information," American Economic Review, American Economic Association, vol. 71(3), pages 393-410, June.
    5. Dybvig, Philip H & Zender, Jaime F, 1991. "Capital Structure and Dividend Irrelevance with Asymmetric Information," The Review of Financial Studies, Society for Financial Studies, vol. 4(1), pages 201-219.
    6. Douglas W. Diamond, 1984. "Financial Intermediation and Delegated Monitoring," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 51(3), pages 393-414.
    7. Cole, Rebel A. & Sokolyk, Tatyana, 2018. "Debt financing, survival, and growth of start-up firms," Journal of Corporate Finance, Elsevier, vol. 50(C), pages 609-625.
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    Keywords

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    JEL classification:

    • C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games

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