Better Borrowers, Fewer Banks?

30 Pages Posted: 4 Mar 2010

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

Frédéric Lobez

Université de Lille Nord de France – European Center for Corporate Control Studies

Jean-Christophe Statnik

University of Lille II - University of Lille LSMRC & ISA

Ydriss Ziane

Sorbonne Graduate Business School

Date Written: January 4, 2010

Abstract

We investigate the relationship between borrower quality and the structure of the pool of banks. First, we develop a theoretical model where the size of the banking pool is a credible signal of firm quality. We argue that better borrowers seek to disclose their quality in a credible way through the structure of the banking pool involving fewer banks. Second, we test our prediction using a sample of more than 3,000 loans from 19 European countries. We perform regressions of the number of bank lenders on various proxies of borrower quality. Our empirical tests corroborate the theoretical predictions. The size of the banking pool is a signal of borrower quality. Hence, good quality firms have fewer lenders in their banking pools.

Keywords: Bank Lending, Borrower Quality, Multiple Banking, Number Of Lenders, Signaling, Europe

JEL Classification: D82, G21, G32

Suggested Citation

Godlewski, Christophe J. and Lobez, Frédéric and Statnik, Jean-Christophe and Ziane, Ydriss, Better Borrowers, Fewer Banks? (January 4, 2010). Available at SSRN: https://ssrn.com/abstract=1564912 or http://dx.doi.org/10.2139/ssrn.1564912

Christophe J. Godlewski

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/

Frédéric Lobez (Contact Author)

Université de Lille Nord de France – European Center for Corporate Control Studies ( email )

Lille Cedex, 59020
France

Jean-Christophe Statnik

University of Lille II - University of Lille LSMRC & ISA ( email )

1, rue de Mulhouse
Lille, 59000
France

Ydriss Ziane

Sorbonne Graduate Business School ( email )

21, rue Broca
Paris, 75005
France
0033(0)153552739 (Phone)
0033(0)153552701 (Fax)

Register to save articles to
your library

Register

Paper statistics

Downloads
62
Abstract Views
637
rank
351,172
PlumX Metrics