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

Hans Degryse, Vasso Ioannidou () and Erik von Schedvin ()

No 8692, CEPR Discussion Papers from C.E.P.R. Discussion Papers

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: Non-exclusivity; Contractual externalities; Credit supply; Debt seniority (search for similar items in EconPapers)
JEL-codes: G21 G34 L13 L14 (search for similar items in EconPapers)
Date: 2012-12
New Economics Papers: this item is included in nep-ban
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13)

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Working Paper: On the Non-Exclusivity of Loan Contracts: An Empirical Investigation (2012)
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