This paper analyzes the optimality of multiple-bank lending, when firms and banks are subject to moral hazard and monitoring is essential. Multiple-bank lending leads to higher per-project monitoring whenever the benefit of greater diversification dominates the costs of free-riding and duplication of effort. The model predicts a greater use of multiple-bank lending when banks have lower equity, firms are less profitable and monitoring costs are high. These results are consistent with some empirical observations concerning the use of multiple-bank lending in small and medium business lending. © 2007 Elsevier Inc. All rights reserved

Cerasi, V., Carletti, E., Daltung, S. (2007). Multiple-bank lending: Diversification and Free-riding in Monitoring. JOURNAL OF FINANCIAL INTERMEDIATION, 16(3), 425-451 [10.1016/j.jfi.2007.03.001].

Multiple-bank lending: Diversification and Free-riding in Monitoring

CERASI, VITTORIA;
2007

Abstract

This paper analyzes the optimality of multiple-bank lending, when firms and banks are subject to moral hazard and monitoring is essential. Multiple-bank lending leads to higher per-project monitoring whenever the benefit of greater diversification dominates the costs of free-riding and duplication of effort. The model predicts a greater use of multiple-bank lending when banks have lower equity, firms are less profitable and monitoring costs are high. These results are consistent with some empirical observations concerning the use of multiple-bank lending in small and medium business lending. © 2007 Elsevier Inc. All rights reserved
Articolo in rivista - Articolo scientifico
multiple monitors; diversification; free-riding problem; multiple bank lending
English
2007
16
3
425
451
reserved
Cerasi, V., Carletti, E., Daltung, S. (2007). Multiple-bank lending: Diversification and Free-riding in Monitoring. JOURNAL OF FINANCIAL INTERMEDIATION, 16(3), 425-451 [10.1016/j.jfi.2007.03.001].
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/10281/320
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