Bargaining with a Bank

58 Pages Posted: 16 Oct 2017 Last revised: 23 Jan 2018

See all articles by Thomas C. Mosk

Thomas C. Mosk

Goethe University Frankfurt - Research Center SAFE

Multiple version iconThere are 2 versions of this paper

Date Written: January 1, 2018

Abstract

This paper examines bargaining as a mechanism to resolve information problems. To guide the analysis, I develop a parsimonious model of a credit negotiation between a bank and firms with varying impatience. In equilibrium, impatient firms accept the bank’s offer immediately, while patient firms wait and negotiate price adjustments. I test the empirical predictions using a hand-collected dataset on credit line negotiations. Firms signing the bank’s offer right away draw down their credit line after origination and default more than late signers. Late signers negotiate price adjustments more frequently, and, consistent with the model, these adjustments predict better ex post performance.

Keywords: Bargaining, Financial Contracting

JEL Classification: G21

Suggested Citation

Mosk, Thomas C., Bargaining with a Bank (January 1, 2018). Available at SSRN: https://ssrn.com/abstract=3053508 or http://dx.doi.org/10.2139/ssrn.3053508

Thomas C. Mosk (Contact Author)

Goethe University Frankfurt - Research Center SAFE ( email )

(http://www.safe-frankfurt.de)
Theodor-W.-Adorno-Platz 3
Frankfurt am Main, 60323
Germany

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