Creditor Concentration: An Empirical Investigation
48 Pages Posted: 11 Sep 2007 Last revised: 8 Nov 2011
Date Written: November 8, 2011
Most of the literature on multiple banking assumes equal financing shares. However, unequal, asymmetric or concentrated bank borrowing is widespread, and creditor concentration is only weakly correlated with the number of bank relationships. This paper therefore investigates the determinants of creditor concentration for German firms using a comprehensive firm-bank level dataset for the time period between 1993 and 2003. We document that corporate borrowing from banks is very often concentrated, even for the largest firms in our sample. Leveraged firms and firms with more redeployable assets concentrate their borrowing from banks, as are firms dealing with a relationship lender that is profitable, that has lower monitoring costs, or that operates in a concentrated regional lending market.
Keywords: bank relationships, asymmetric financing, banking competition
JEL Classification: G21, G32, G33
Suggested Citation: Suggested Citation