Investment in Relationship-Specific Assets: Does Finance Matter?

Madina Kukenova and Martin Strieborny

MPRA Paper from University Library of Munich, Germany

Abstract: We show that contract-intensive industries particularly thrive both in countries with high initial level of financial development and in the US states that deregulated their banking sector. These industries use high share of relationship-specific inputs that can be purchased only via specific contracts with the suppliers. Accordingly, both firms in those industries and their suppliers face above-average levels of risk and transaction costs. Our empirical results thus confirm the theoretical claim that finance promotes real economy via managing risk and decreasing transaction costs. Furthermore, the pro-growth e¤ect of finance seems to come from financial intermediaries like banks rather than from stock markets. This suggests that the intrinsic functions of relationship-banking (long-term commitment, increase in reputation and planning horizon of the borrowers) are especially important for the contract-intensive industries.

Keywords: financial development; relationship-specific investment; growth (search for similar items in EconPapers)
JEL-codes: G21 O16 O40 (search for similar items in EconPapers)
Date: 2009-04
New Economics Papers: this item is included in nep-fdg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

Downloads: (external link)
https://mpra.ub.uni-muenchen.de/15229/1/MPRA_paper_15229.pdf original version (application/pdf)

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? (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)
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:pra:mprapa:15229

Access Statistics for this paper

More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Joachim Winter ().