Investment in Relationship-Specific Assets: Does Finance Matter?

Martin Strieborny and Madina Kukenova

No 2013/10, Knut Wicksell Working Paper Series from Lund University, Knut Wicksell Centre for Financial Studies

Abstract: Existing literature highlights opportunistic behavior as the main reason why rational agents underinvest in relationship-specific assets (the hold-up problem). However, a supplier would also be reluctant to undertake relationship-specific investment if she cannot observe financial stability or planning horizon of a buyer. By combining insights from research on relationship-specific investment and signaling role of financial intermediaries, we argue that a strong banking sector can alleviate these information asymmetries between buyers and suppliers. We empirically confirm this hypothesis by showing that industries dependent on relationship-specific investment from their suppliers grow disproportionately faster in countries with a strong banking sector.

Keywords: Financial development; relationship-specific investment; growth (search for similar items in EconPapers)
JEL-codes: G21 O16 O40 (search for similar items in EconPapers)
Pages: 36 pages
Date: 2013-06-19
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Investment in Relationship-Specific Assets: Does Finance Matter? (2016)
Working Paper: Investment in Relationship-Specific Assets: Does Finance Matter? (2013)
Working Paper: Investment in Relationship-Specific Assets: Does Finance Matter? (2011)
Working Paper: Investment in Relationship-Specific Assets: Does Finance Matter ? (2011)
Working Paper: Investment in Relationship-Specific Assets: Does Finance Matter? (2010)
Working Paper: Investment in Relationship-Specific Assets: Does Finance Matter? (2010)
Working Paper: Investment in Relationship-Specific Assets: Does Finance Matter? (2010)
Working Paper: Investment in Relationship-Specific Assets: Does Finance Matter? (2009)
Working Paper: Investment in Relationship-Specific Assets: Does Finance Matter? (2009)
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