The Commitment Effect of Choosing the Same Bank

Marco Haan (), Yohanes Eko Riyanto () and Linda A. Toolsema ()
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Linda A. Toolsema: University of Groningen

Departmental Working Papers from National University of Singapore, Department of Economics

Abstract: In a model where firms use external funds to finance R&D investments, we show that they may prefer to borrow from the same bank, rather than going to competing banks. A monopolist bank will capture more of firms' operating profits. But, these profits will also be higher, since having the same bank serves as a commitment device not to spend too much on R&D. In our model, the latter effect dominates.

New Economics Papers: this item is included in nep-ino
Date: 2001-05

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Related works:
Working Paper: The commitment effect of choosing the same bank (2001)
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