Coordination Failure with Multiple-Source Lending, the Cost of Protection Against a Powerful Lender

Franz Hubert and Dorothea Schäfer

Journal of Institutional and Theoretical Economics (JITE), 2002, vol. 158, issue 2, 256-275

Abstract: We analyze how a firm might protect quasirents in an environment of imperfect capital markets, where switching lenders is costly to the borrower, and contracts are incomplete. As switching costs make the firm vulnerable to ex post exploitation, it may want to diversify lending. Multiple-source lending, however, suffers from coordination failure. An uncoordinated withdrawal of funds will force a financially distressed firm into bankruptcy even though it could have been rescued if lenders had stayed firm. We show that the gains from preventing renegotiation do outweigh the cost of coordination failure if a single lender has sufficient bargaining power.

JEL-codes: G33 (search for similar items in EconPapers)
Date: 2002
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (20)

Downloads: (external link)
https://www.mohrsiebeck.com/en/article/coordinatio ... 16280932456022975394 (text/html)
Fulltext access is included for subscribers to the printed version.

Related works:
Journal Article: Coordination Failure with Multiple-Source Lending: The Cost of Protection against a Powerful Lender (2002)
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:mhr:jinste:urn:sici:0932-4569(200206)158:2_256:cfwmlt_2.0.tx_2-h

Ordering information: This journal article can be ordered from
Mohr Siebeck GmbH & Co. KG, P.O.Box 2040, 72010 Tübingen, Germany

Access Statistics for this article

Journal of Institutional and Theoretical Economics (JITE) is currently edited by Gerd Mühlheußer and Bayer, Ralph-C

More articles in Journal of Institutional and Theoretical Economics (JITE) from Mohr Siebeck, Tübingen
Bibliographic data for series maintained by Thomas Wolpert ().