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The Commitment Effect of Choosing the Same Bank


  • Marco Haan

    () (University of Groningen)

  • Yohanes E. Riyanto

    () (National University of Singapore)

  • Linda A. Toolsema

    () (University of Groningen)


In a model where firms use external funds to finance R&D investments, we show that they may prefer to borrow from the same bank, rather than going to competing banks. A monopolist bank will capture more of firms' operating profits. But, these profits will also be higher, since having the same bank serves as a commitment device not to spend too much on R&D. In our model, the latter effect dominates.

Suggested Citation

  • Marco Haan & Yohanes E. Riyanto & Linda A. Toolsema, 2001. "The Commitment Effect of Choosing the Same Bank," Departmental Working Papers wp0110, National University of Singapore, Department of Economics.
  • Handle: RePEc:nus:nusewp:wp0110

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