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Concentration in corporate bank loans. What do we learn from European comparisons?

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  • Christophe J. Godlewski

    () (Laboratoire de Recherche en Gestion et Economie, Université de Strasbourg)

  • Ydriss Ziane

    () (BETA, Université de Nancy)

Abstract

The aim of this paper is to empirically investigate the determinants of creditor concentration in the use of bank loans by firms in a European cross-country framework. We analyze the influence of loan and borrower characteristics but also banking market structure and legal enforcement country-specific variables that are expected to influence the financial and strategic decision relative to the number of bank lenders. We find that firms tend to diversify sources of financing by reducing bank concentration when their level of quality is higher and both asymmetric information and the risk of early liquidation are minimal (larger, older, transparent, liquid and profitable firms). Furthermore, lenders’ monitoring appears to be an important feature of lending concentration, particularly in order to prevent private benefits extraction by insiders in legal environment where shareholders benefit from better protections.

Suggested Citation

  • Christophe J. Godlewski & Ydriss Ziane, 2009. "Concentration in corporate bank loans. What do we learn from European comparisons?," Working Papers of LaRGE Research Center 2009-06, Laboratoire de Recherche en Gestion et Economie (LaRGE), Université de Strasbourg.
  • Handle: RePEc:lar:wpaper:2009-06
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    File URL: http://ifs.u-strasbg.fr/large/publications/2009/2009-06.pdf
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    Keywords

    Financial intermediation; bank lending; creditor concentration; information asymmetry; Europe.;

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation

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