Concentration in corporate bank loans. What do we learn from European comparisons?

Christophe Godlewski and Ydriss Ziane (ydriss.ziane@univ-nancy2.fr)
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Ydriss Ziane: BETA, Université de Nancy

Working Papers of LaRGE Research Center from Laboratoire de Recherche en Gestion et Economie (LaRGE), Université de Strasbourg

Abstract: The aim of this paper is to empirically investigate the determinants of creditor concentration in the use of bank loans by firms in a European cross-country framework. We analyze the influence of loan and borrower characteristics but also banking market structure and legal enforcement country-specific variables that are expected to influence the financial and strategic decision relative to the number of bank lenders. We find that firms tend to diversify sources of financing by reducing bank concentration when their level of quality is higher and both asymmetric information and the risk of early liquidation are minimal (larger, older, transparent, liquid and profitable firms). Furthermore, lenders’ monitoring appears to be an important feature of lending concentration, particularly in order to prevent private benefits extraction by insiders in legal environment where shareholders benefit from better protections.

Keywords: Financial intermediation; bank lending; creditor concentration; information asymmetry; Europe. (search for similar items in EconPapers)
JEL-codes: G21 G32 G33 (search for similar items in EconPapers)
Date: 2009
New Economics Papers: this item is included in nep-ban, nep-bec, nep-cta and nep-eec
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Persistent link: https://EconPapers.repec.org/RePEc:lar:wpaper:2009-06

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