Concentration in Corporate Bank Loans - What Do We Learn from European Comparisons?

21 Pages Posted: 29 Jul 2009

See all articles by Christophe J. Godlewski

Christophe J. Godlewski

University of Strasbourg - Faculty of Law and Business; EM Strasbourg Business School; LaRGE Research Center

Ydriss Ziane

University of Angers - Bureau of Economic Theory and Application (BETA)

Date Written: February 29, 2009

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 variables that are expected to influence the financial and strategic decisions relative to bank lending concentration. 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.

Keywords: Financial intermediation, bank lending, creditor concentration, information asymmetry, agency costs, Europe

JEL Classification: G21, G32, G33

Suggested Citation

Godlewski, Christophe J. and Ziane, Ydriss, Concentration in Corporate Bank Loans - What Do We Learn from European Comparisons? (February 29, 2009). Available at SSRN: https://ssrn.com/abstract=1440885 or http://dx.doi.org/10.2139/ssrn.1440885

Christophe J. Godlewski (Contact Author)

University of Strasbourg - Faculty of Law and Business ( email )

1 place d'Athènes
Strasbourg, 67000
France

HOME PAGE: http://droit.unistra.fr/

EM Strasbourg Business School ( email )

61 Avenue de la Forêt Noire
Strasbourg, 67000
France

HOME PAGE: http://www.em-strasbourg.eu/

LaRGE Research Center ( email )

1 place d'Athènes
Strasbourg, 67000
France

HOME PAGE: http://droit.unistra.fr/

Ydriss Ziane

University of Angers - Bureau of Economic Theory and Application (BETA) ( email )

13, Place Carnot
Strasbourg, 67000
France

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