MULTIPLE BANKING RELATIONSHIPS AND OVER‐LEVERAGE IN ITALIAN MANUFACTURING FIRMS

Stefania Cosci and Valentina Meliciani ()

Manchester School, 2006, vol. 74, issue s1, 78-92

Abstract: The purpose of this paper is to shed more light on the determinants of the number of bank lending relationships. In particular we look at the link between over‐leverage and the number of banking relationships for a sample of Italian manufacturing firms, distinguishing between firms with a main bank and firms without a main bank. The main result of the paper is that the number of banking relationships increases with over‐leverage only for firms without a main bank. We argue that this result is consistent with the view that, when banks perform transaction lending, firms can increase their debt capacity by increasing the number of creditors, promising ex ante up to the full amount of available assets to each one of the creditors.

Date: 2006
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https://doi.org/10.1111/j.1467-9957.2006.00518.x

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Working Paper: Multiple banking Relationships and Over-Leverage in Italian Manufacturing Firms (2005)
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