Agency Cost of Debt and Credit Market Imperfections: A Bargaining Approach

Topics:
Commercial Banking,
Commercial Lending
Tags:
Advertising & Promotion,
Agency,
Bank,
Blackwell Publishing,
Finance,
Marketing
Source:
Blackwell Publishing

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Overview: This paper studies the effect of credit market imperfections, measured by the relative bargaining power of banks, on the agency costs of debt finance. The threshold of obtaining loan finance is shown to be independent of the relative bargaining power of the financier. However, lower relative bargaining power of banks leads to lower lending rates and investment return distributions with lower, but less risky returns.

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Format: PDF | Size: 111KB | Date: Oct 2004 | Pages: 14

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