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Heinemann, Frank; Elsas, Ralf ORCID logoORCID: https://orcid.org/0000-0001-8117-1175 und Tyrell, Marcel (2004): Multiple But Asymmetric Bank Financing: The Case of Relationship Lending. SSRN

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Abstract

Empirical evidence suggests that even those firms presumably most in need of monitoring-intensive financing (young, small, and innovative firms) have a multitude of bank lenders, where one may be special in the sense of relationship lending. However, theory does not tell us a lot about the economic rationale for relationship lending in the context of multiple bank financing. To fill this gap, we analyze the optimal debt structure in a model that allows for multiple but asymmetric bank financing. The optimal debt structure balances the risk of lender coordination failure from multiple lending and the bargaining power of a pivotal relationship bank. We show that firms with los expected cash-flows or high asset specificity prefer asymmetric financing, while firms with high expected cash-flow or high asset specificity tend to finance without relationship bank.

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