Corporate main bank decision

Do firms select their main bank relationship according to their risk or risk preferences? Relationship banking is attractive for high risk firms since it improves their access to finance and provides liquidity insurance. Low risk firms instead may not want to bear the additional costs. I employ a nested logit model to study the determinants of the main bank relationship decision by newly established German firms. I find that firms that ask for bank support in case of financial distress are more likely to choose a relationship-oriented bank, such as a public or cooperative bank. Cost sensitive firms are more likely to choose a private bank. But I find no evidence that firms select a bank according to ex ante risk. Transaction oriented banks are not able to attract low risk firms

Die Hausbankentscheidung junger Unternehmen

In einem aktuellen Diskussionspapier des ZEW wird gezeigt: Junge Unternehmen, die eine Liquiditätsversicherung oder Bankkredite nachfragen, wählen deutlich häufiger eine Sparkasse oder Genossenschaftsbank zu ihrer Hausbank als eine Privatbank. Kostensensitive Unternehmen wählen hingegen häufiger eine Privatbank

From soft and hard-nosed bankers : bank lending strategies and the survival of financially distressed firms

Do private banks act as hard-nosed bankers when firms get financially distressed compared to public banks that have the mandate to support regional economy? For German firms in the period 2000-2005, I find that the probability of leaving the market after financial distress is higher for firms financed by private banks. The effects of different lending strategies are even larger for cooperative banks than for public banks

From soft and hard-nosed bankers: bank lending strategies and the survival of financially distressed firms

Do private banks act as hard-nosed bankers when firms get financially distressed compared to public banks that have the mandate to support regional economy? For German firms in the period 2000-2005, I find that the probability of leaving the market after financial distress is higher for firms financed by private banks. The effects of different lending strategies are even larger for cooperative banks than for public banks. --financially distressed firms,bank lending,public banks,cooperative banks

Information Externalities in Bank Based Financing for Private Innovation - Can Specialization Overcome Asymmetries?

Investments in R&D have been identified as a cornerstone for growth and competitive advantages of firms and whole economies. We investigate the role that a firm's main bank plays for its investment in R&D. Existing literature suggests that the inherent information asymmetries of R&D projects make them hardly applicable for bank lending. We challenge this assumption by arguing that banks are heterogeneous with regard to their information processing capabilities. They can benefit from information externalities arising from industry and geographical specialization in their overall loan portfolio. We combine finance as well as innovation management and economics literature to develop this argument. We test our theoretical framework for more than 7,500 firm observations in Germany and their R&D expenditures over a five year time period. A unique database allows us to construct the overall corporate client portfolio of the main bank for each of these firms. Our results show trade-offs in the degree and nature of bank specialization. Industry specialization of a firm's main bank has a u-shaped effect on its R&D investment. Regional specialization, though, has an inverse u-shaped effect. Recommendations on optimal firm-bank combinations for fostering R&D investment can be developed based on these results

Talfahrt setzt sich fort

Die Anzahl der Unternehmensgründungen in Deutschland ist im dritten Jahr in Folge zurückgegangen. Im Jahr 2007 wurden 232.000 Unternehmen gegründet. Das sind 4 v.H. weniger als im Vorjahr. Der Rückgang ist auf die Entwicklung im Handel und im produzierenden Gewerbe zurückzuführen. Wie bereits im vergangenen Jahr erweist sich das Gründungsaufkommen in den Bereichen unternehmensnahe Dienstleistungen und konsumorientierte Dienstleistungen stabil. Eine Betrachtung alleine für Ostdeutschland weist in allen Branchen auf einen starken Abwärtstrend bei den Gründungen hin. Zu diesen Ergebnissen kommt eine aktuelle Auswertung des ZEW-Gründungspanels

Wie treffen Multis Investitionsentscheidungen: Das Fallbeispiel General Motors

In der öffentlichen Diskussion um die Bedeutung multinationaler Konzerne für die deutsche Wirtschaft hatten und haben die Ereignisse im Zusammenhang mit Opel, der deutschen Tochter von General Motors, ein besonderes Maß an Aufmerksamkeit erregt. Als mit der Änderung der Konzernstruktur im Juni 2004 der unternehmensinterne Wettbewerb um die Produktionskapazitäten institutionalisiert wurde, war dies von vielen Beobachtern als Schritt hin zu mehr Effizienz und höherer Profitabilität gewertet worden. Doch ein solcher interner Wettbewerb um die Ressourcen eines Unternehmens kann behindert sein und zu ineffizienter Mittelverwendung führen: Informationsund Durchsetzungsprobleme sowie Machtkämpfe innerhalb eines Konzerns schränken nämlich die Fähigkeit und Bereitschaft der Konzernleitung ein, vorhandene Ressourcen in ihre produktivsten Unternehmensteile zu lenken. Unter Rückgriff auf die institutionenökonomische Organisationslehre werden mögliche Effizienzprobleme der unternehmensinternen Allokation von Kapital aufgezeigt und deren Relevanz im Rahmen einer Fallstudie zu General Motors/Opel diskutiert

Firms and their main banks : Effects of main bank characteristics on firms' bank choice, R&D investment, and survival

1st paper: In this paper I study the effect of bank relationships in situations where firms are financially distressed. Does survival of financially distressed firms depend on their main bank relationship? I characterize the main bank relationship in four dimensions: First, the strength of the relationship. Second, market discipline and the characteristics of the main bank. Third, the main bank's ability to process soft information. Fourth, the degree of local banking market competition. Using data from 2000-2005, I estimate the probability that a financially distressed German firm exits the market. I find that firms with stronger bank relationships are less likely to leave the market. I control for the probability that a firm becomes financially distressed. I find that the bank type influences a firm's distress but not its market exit probability. 2nd paper: R&D investments are cornerstones for growth and competitive advantage of firms and whole economies. However, banks as the main provider of external funds for the vast majority of firms seem ill-equipped to provide the necessary funding. We question the dominant assumption that all banks suffer equally from information uncertainties and asymmetries in the evaluation of R&D. Instead, we argue that information externalities emerge from the information a bank can aggregate from the other firms in its portfolio. This positive effect of information access needs to be balanced with correlated risk concerns in the portfolio. We allow for industry differences with regards to underlying innovation uncertainties and signaling effects from the firms themselves. We test this model for more than 5,000 German firm observations, their main bank’s client portfolio and their R&D expenditures over a six year period. The theoretical predictions on information externalities and correlated risk concerns between a bank’s degree of industry specialization and its client’s R&D investment are supported. The potentials for altering the bank risk assessments through signaling are limited to patenting. Government R&D subsidies and venture capital investments have no additional signaling effect. Recommendations are derived based on these results. 3rd paper: Do firms select their main bank relationship according to their risk or risk preferences? Relationship banking is attractive for high risk firms since it improves their access to finance and provides liquidity insurance. Low risk firms instead may not want to bear the additional costs. I employ a nested logit model to study the determinants of the main bank relationship decision by newly established German firms. I find that firms that ask for bank support in case of financial distress are more likely to choose a relationship-oriented bank, such as a public or cooperative bank. Cost sensitive firms are more likely to choose a private bank. But I find no evidence that firms select a bank according to ex ante risk. Transaction oriented banks are not able to attract low risk firms

Die Entwicklung des regionalen Gründungsgeschehens im High-Tech-Sektor

In Ballungszentren werden viele High-Tech-Unternehmen gegründet. Die regionale Verteilung der High-Tech-Gründungen hat sich im letzten Jahrzehnt nur wenig verändert. Hochbitratiges Internet und Wissensinfrastruktur sind wichtige Treiber für die Gründung von High-Tech-Unternehmen in einer Region

An information economics perspective on main bank relationships and firm R&D

Information economics has emerged as the primary theoretical lens for framing financing decisions in firm R&D investment. Successful outcomes of R&D projects are either ex-ante impossible to predict or the information is asymmetrically distributed between inventors and investors. As a result, bank lending for firm R&D has been rare. However, firms can signal the value of their R&D activities and as a result reduce the information deficits that block the availability of external funding. In this study we focus on three types of signals: Firm’s existing patent stock, the presences of a joint venture investor and whether the firm has received a government R&D subsidy. We argue theoretically that all of these signals have the potential to alter the risk assessment of the firm’s main bank. Additionally, we explore heterogeneities in these risk assessments arising from the industry level and the main bank’s portfolio. We test our theoretical predictions for a sample of more than 7,000 firm observations in Germany over a multi-year period. Our theoretical predictions are only supported for firms’ past patent activity while other signals fail to alter the risk assessment of a firm’s main bank. Besides, we confirm that the risk evaluation is not randomly distributed across bank-firm dyads but depends on industry and bank characteristics