On the Non-Exclusivity of Loan Contracts: An Empirical Investigation

46 Pages Posted: 22 Dec 2011

See all articles by Hans Degryse

Hans Degryse

KU Leuven, Department Accounting, Finance and Insurance; Centre for Economic Policy Research (CEPR)

Vasso Ioannidou

Lancaster University - Management School; Centre for Economic Policy Research (CEPR)

Erik L. von Schedvin

Sveriges Riksbank

Multiple version iconThere are 4 versions of this paper

Date Written: December 2012

Abstract

Credit contracts are non-exclusive. A string of theoretical papers shows that nonexclusivity generates important negative contractual externalities. Employing a unique dataset, we identify how the contractual externality stemming from the non-exclusivity of credit contracts affects credit supply. In particular, using internal information on a creditor's willingness to lend, we find that a creditor reduces its loan supply when a borrower initiates a loan at another creditor. Consistent with the theoretical literature on contractual externalities, the effect is more pronounced the larger the loans from the other creditor. We also find that the initial creditor's willingness to lend does not change if its existing and future loans retain seniority over the other creditors' loans and are secured with assets whose value is high and stable over time.

Keywords: contractual externalities, credit supply, debt seniority, non-exclusivity

JEL Classification: G21, G34, L13, L14

Suggested Citation

Degryse, Hans and Ioannidou, Vasso and von Schedvin, Erik L., On the Non-Exclusivity of Loan Contracts: An Empirical Investigation (December 2012). CEPR Discussion Paper No. DP8692. Available at SSRN: https://ssrn.com/abstract=1976034

Hans Degryse (Contact Author)

KU Leuven, Department Accounting, Finance and Insurance ( email )

Naamsestraat 69
Leuven, B-3000
Belgium

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Vasso Ioannidou

Lancaster University - Management School ( email )

Bailrigg
Lancaster, LA1 4YX
United Kingdom

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Erik L. Von Schedvin

Sveriges Riksbank ( email )

Brunkebergstorg 11
SE-103 37 Stockholm
Sweden

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