Empirical Determinants of Bargaining Power

Hirofumi Uchida

Discussion papers from Research Institute of Economy, Trade and Industry (RIETI)

Abstract: This paper empirically investigates what determine bargaining power between a lender and a borrower who have continuing transactional relationships. Bargaining power is proxied by which side of the transaction, i.e. the lender or the borrower, usually incurs a shoe-leather cost when they have contact. The proxy is regressed on three types of variables that can potentially determine distribution: (i) lender's competition, (ii) the degree of informational asymmetry between the two parties, and (iii) borrower performance. Consistent with theoretical predictions, we find that intensive lender competition and borrowers' good performance increase the likelihood of the lender incurring the cost, or the borrower's power. We also obtain evidence suggesting that some lenders enjoy a status of informational monopoly and capture borrowers.

Pages: 12 pages
Date: 2006-06
New Economics Papers: this item is included in nep-cfn and nep-com
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Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:eti:dpaper:06030

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