Project Bundling, Liquidity Spillovers, and Capital Market Discipline

Holger M. Müller () and Roman Inderst
Additional contact information
Holger M. Müller: Department of Economics, University of Mannheim, Postal: A5, Room A237, 68131 Mannheim, Germany

No 99-89, Sonderforschungsbereich 504 Publications from Sonderforschungsbereich 504, Universität Mannheim, Sonderforschungsbereich 504, University of Mannheim

Abstract: This paper presents a theory of integration based on the inability of parties to write comprehensive financial contracts. In our model, integration entails both benefits and costs. On the one hand, integration involves liquidity spillovers between projects ensuring that integrated firms can raise external finance on easier terms than stand-alone firms. On the other hand, integration reduces the firms' need to return to the capital market for follow-up financing. But in a world where contracting is incomplete, the threat not to fund follow-up projects may be the only means that investors have to induce borrowers to repay their debt. By lessening this threat, integration may raise the cost of external finance.

Pages: 31 pages
Date: 1999-11-13
Note: Financial Support from Deutsche Forschungsgemeinschaft, Sonderforschungsbereich 504, is gratefully acknowledged.
References: Add references at CitEc
Citations: View citations in EconPapers (2)

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:xrs:sfbmaa:99-89

Ordering information: This working paper can be ordered from

Access Statistics for this paper

More papers in Sonderforschungsbereich 504 Publications from Sonderforschungsbereich 504, Universität Mannheim Contact information at EDIRC., Sonderforschungsbereich 504, University of Mannheim
Bibliographic data for series maintained by Carsten Schmidt ( this e-mail address is bad, please contact ).