Multiple Creditors and Information Rights: Theory and Evidence from Us Firms

35 Pages Posted: 5 Apr 2004

See all articles by Luigi Guiso

Luigi Guiso

Einaudi Institute for Economics and Finance (EIEF)

Raoul Minetti

Michigan State University - Department of Economics

Date Written: March 2004

Abstract

We analyse how a firm allocates information rights across its multiple banks. By differentiating information disclosed, a firm prevents its banks from continuing projects (possibly unsound) solely in order to use their superior information and seize assets during the reorganization. Informational diversity can also lead to the premature liquidation of sound projects, however. We derive the optimal allocation of information as a function of the redeployability and the heterogeneity of the firm's assets, and of the costs of restructuring the firm in distress. Using a sample of US firms, we find evidence that supports the empirical predictions of the model.

Keywords: Bank relationships, multiple banking, firms financing

JEL Classification: G21, G33, G34

Suggested Citation

Guiso, Luigi and Minetti, Raoul, Multiple Creditors and Information Rights: Theory and Evidence from Us Firms (March 2004). Available at SSRN: https://ssrn.com/abstract=527222

Luigi Guiso (Contact Author)

Einaudi Institute for Economics and Finance (EIEF) ( email )

Via Sallustiana 62
Rome, 00187
Italy
+39 06 4792 4858 (Phone)
+39 06 4792 4872 (Fax)

HOME PAGE: http://www.eief.it/faculty-visitors/faculty-a-z/luigi-guiso/

Raoul Minetti

Michigan State University - Department of Economics ( email )

101 Marshall Hall
East Lansing, MI 48824
United States
517-355-7349 (Phone)
517-432-1068 (Fax)

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