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On the Non-Exclusivity of Loan Contracts: An Empirical Investigation

  • Degryse, Hans

    ()

    (Department of Finance)

  • Ioannidou , Vasso

    ()

    (Department of Fin)

  • von Schedvin, Erik

    ()

    (Research Department, Central Bank of Sweden)

A string of theoretical papers shows that the non-exclusivity of credit contracts generates important negative contractual externalities. Employing a unique dataset, we identify how these externalities affect the supply of credit. Using internal information on a creditor’s willingness to lend, we find that a creditor reduces its credit supply when a borrower obtains a loan at another creditor (an “outside loan”). Consistent with the theoretical literature, the effect is more pronounced the larger the outside loans and it is muted if the initial creditor’s existing and future loans retain seniority over the outside loans and are secured with valuable collateral.

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File URL: http://www.riksbank.se/Documents/Rapporter/Working_papers/2012/rap_wp258_120224.pdf
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Paper provided by Sveriges Riksbank (Central Bank of Sweden) in its series Working Paper Series with number 258.

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Length: 42 pages
Date of creation: 01 Feb 2012
Date of revision:
Handle: RePEc:hhs:rbnkwp:0258
Contact details of provider: Postal: Sveriges Riksbank, SE-103 37 Stockholm, Sweden
Phone: 08 - 787 00 00
Fax: 08-21 05 31
Web page: http://www.riksbank.com/
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  19. Cerqueiro, Geraldo & Ongena, Steven & Roszbach, Kasper, 2012. "Collateralization, Bank Loan Rates and Monitoring: Evidence from a Natural Experiment," Working Paper Series 257, Sveriges Riksbank (Central Bank of Sweden).
  20. Degryse, Hans & Kim, Moshe & Ongena, Steven, 2009. "Microeconometrics of Banking Methods, Applications, and Results," OUP Catalogue, Oxford University Press, number 9780195340471, March.
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  23. João A. C. Santos & Luísa A. Farinha, 2000. "Switching from single to multiple bank lending relationships: determinants and implications," BIS Working Papers 83, Bank for International Settlements.
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  36. repec:dgr:kubcen:2011087 is not listed on IDEAS
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