On the Nonexclusivity of Loan Contracts: An Empirical Investigation

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in AbstractA 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.JEL Classification Numbers: G21, G34, L13, L14.

Some Borrowers Are More Equal than Others: Bank Funding Shocks and Credit Reallocation*

“…More importantly, they also have substitutes available, which reduces the potency of the sector market share and sector specialization channels. Second, recent research by Degryse, Ioannidou, and von Schedvin (2016) shows that an outside loan (i.e., a loan from another bank) decreases a bank's willingness to lend to this firm. This, together with the prospect of potential coordination problems between lenders when a firm defaults, might make it less attractive to shield multiple bank borrowers.…”

Corporate Acquisitions and Bank Relationships

“…For the U.S., Petersen and Rajan (1994), Berger and Udell (1995), Bharath et al (2011), and Ivashina and Kovner (2011), among others, find that longer relationships with fewer banks are associated with a decrease in loan rates. Conversely, for many European countries, there is evidence that relationship borrowers are charged higher rates (see Angelini et al, 1998, Harhoff andKorting, 1998, among others) or suffer a reduction in the supply of loans from their incumbent bank once they use outside loans from other lenders (Degryse et al, 2016). 7 We complement this literature and provide novel evidence on the impact of changes in firm-bank relationships-also varying by the nationality of banks, the extent of their links to local firms and presence in local market, or their specialization in a particular industry-on the availability and cost of financing for firms, as well as on their economic outcomes.…”

Corporate Acquisitions and Bank Relationships

“…For the U.S., Petersen and Rajan (1994), Berger and Udell (1995), Bharath et al (2011), andIvashina andKovner (2011), among others, find that longer relationships with fewer banks are associated with a decrease in loan rates. Conversely, for many European countries, there is evidence that relationship borrowers are charged higher rates (see Angelini et al, 1998, Harhoff andKorting, 1998, among others) or suffer a reduction in the supply of loans from their incumbent bank once they use outside loans from other lenders (Degryse et al, 2016). 7 We complement this literature and provide novel evidence on the impact of changes in firm-bank relationships-also varying by the nationality of banks, the extent of their links to local firms and presence in local market, or their specialization in a particular industry-on the availability and cost of financing for firms, as well as on their economic outcomes.…”