Bargaining with a bank

Thomas Mosk

No 211, SAFE Working Paper Series from Leibniz Institute for Financial Research SAFE

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 levels of 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 line of credit 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: Credit lines; Contract terms; Bargaining; Screening (search for similar items in EconPapers)
JEL-codes: G21 G32 (search for similar items in EconPapers)
Date: 2018
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 (1)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:safewp:211

DOI: 10.2139/ssrn.3186111

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