Multiple Banking Relationships and Over-Leverage in Italian Manufacturing Firms

15 Pages Posted: 17 Aug 2006

See all articles by Stefania Cosci

Stefania Cosci

University Lumsa

Valentina Meliciani

LUISS Guido Carli University - LUISS Business school

Abstract

The purpose of this paper is to shed more light on the determinants of the number of bank lending relationships. In particular we look at the link between over-leverage and the number of banking relationships for a sample of Italian manufacturing firms, distinguishing between firms with a main bank and firms without a main bank. The main result of the paper is that the number of banking relationships increases with over-leverage only for firms without a main bank. We argue that this result is consistent with the view that, when banks perform transaction lending, firms can increase their debt capacity by increasing the number of creditors, promising ex ante up to the full amount of available assets to each one of the creditors.

Suggested Citation

Cosci, Stefania and Meliciani, Valentina, Multiple Banking Relationships and Over-Leverage in Italian Manufacturing Firms. Manchester School, Vol. 74, No. S1, pp. 78-92, September 2006. Available at SSRN: https://ssrn.com/abstract=924670 or http://dx.doi.org/10.1111/j.1467-9957.2006.00518.x

Stefania Cosci

University Lumsa

Via della Traspontina
Roma, Rome 00192
Italy

Valentina Meliciani (Contact Author)

LUISS Guido Carli University - LUISS Business school ( email )

Viale Pola 12
Rome, 00198
Italy

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