The Optimal Concentration of Creditors

Ivo Welch and Arturo Bris

Yale School of Management Working Papers from Yale School of Management

Abstract: Our model assumes that creditors need to expend resources to collect on claims. Consequently, because diffuse creditors suffer from mutual free-riding (Holmstrom (1982)), they fare worse than concentrated creditors (e.g. a house bank). The model predicts that measures of debt concentration relate positively to creditors' (aggregate) debt collection expenditures and positively to management's chosen expenditures to resist paying. However, collection activity is purely redistributive, so social waste is larger when creditors are concentrated. If borrower quality is not known, the best firms choose the most concentrated creditors and pay higher expected yields.

Keywords: Banking; Capital Structure (search for similar items in EconPapers)
Date: 2001-11-01, Revised 2004-04-01
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://icfpub.som.yale.edu/publications/2627 (application/pdf)
Our link check indicates that this URL is bad, the error code is: 500 Can't connect to icfpub.som.yale.edu:80 (A connection attempt failed because the connected party did not properly respond after a period of time, or established connection failed because connected host has failed to respond.)

Related works:
Journal Article: The Optimal Concentration of Creditors (2005)
Working Paper: The Optimal Concentration of Creditors (2004)
Working Paper: The Optimal Concentration of Creditors (2002)
Working Paper: The Optimal Concentration of Creditors (2001)
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:ysm:somwrk:ysm248

Access Statistics for this paper

More papers in Yale School of Management Working Papers from Yale School of Management Contact information at EDIRC.
Bibliographic data for series maintained by ().