The concentration of creditors: evidence from small businesses

Liang Han, David Storey and Stuart Fraser

Applied Financial Economics, 2008, vol. 18, issue 20, 1647-1656

Abstract: This article examines the determinants of concentration of creditors. The empirical evidence drawn from this article supports the proposition of Bolton and Scharfstein (1996) that for negotiation reasons, high-quality borrowers tend to borrow from multiple sources and is contrary to the theoretical prediction of Bris and Welch (2005). This finding implies the existence of hold-up problems in financing small businesses where information conveyance is difficult between lenders. It is further supported by the evidence that dispersed bank relationships are associated with relationships of a longer history and a closer physical distance to lenders.

Date: 2008
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DOI: 10.1080/09603100701720476

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