Multiple Creditors and Information Rights: Theory and Evidence from US Firms

Luigi Guiso () and Raoul Minetti

No 4278, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We analyse how a firm allocates information rights across its multiple banks. By differentiating information disclosed, a firm prevents its banks from continuing projects (possibly unsound) solely in order to use their superior information and seize assets during the reorganization. Informational diversity can also lead to the premature liquidation of sound projects, however. We derive the optimal allocation of information as a function of the redeployability and the heterogeneity of the firm’s assets, and of the costs of restructuring the firm in distress. Using a sample of US firms, we find evidence that supports the empirical predictions of the model.

Keywords: bank relationships; firms financing; multiple banking (search for similar items in EconPapers)
JEL-codes: G21 G33 G34 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-acc and nep-cfn
Date: Written
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