1 Introduction
2 Related literature and hypothesis
3 Data and definitions
3.1 Data
Category | Variable | Definition | Median | Mean |
N
|
---|---|---|---|---|---|
Panel A: German sample
| |||||
Type of information | |||||
Hard |
FINRAT
| Rating for hard information (financial statements), scale of 1 (best) to 6 (worst) | 4 | 3.66 | 820 |
Soft |
MGRAT
| Rating for soft information (management skills), scale of 1 (best) to 6 (worst) | 2 | 2.69 | 742 |
Borrower characteristics | |||||
SALES
| Log of total sales (DEM) | 11.59 | 11.55 | 913 | |
TA
| Log of total assets (DEM) | 11.13 | 11.17 | 915 | |
Bank relationship characteristics | |||||
DURATION
| Log of the length of the bank relationship (months) | 5.25 | 5.10 | 1,002 | |
NUMBANK
| Log of the number of bank relationships | 1.61 | 1.54 | 917 | |
HOUSEBANK
| Main bank (dummy) | 0 | 0.39 | 1,062 | |
CREDIT_LINE
| Existence of a line of credit (dummy) | 1 | 0.85 | 1,062 | |
Loan terms | |||||
SPREAD
| Spread on line of credit (percentage pts) | 3.63 | 3.64 | 761 | |
COLLAT
| Collateral relative to credit exposure (%) | 29.72 | 35.91 | 1,062 | |
Panel B: US sample
| |||||
Type of information | |||||
Hard |
CREDIT_SCORE
| Credit score based on financials and payment information, scale from 1 (best) to 6 (worst), included in reverse order of D&B code | 3 | 3.03 | 1,756 |
Soft |
EDU
| Education of main owner, scale from 1 (highest) to 7 (lowest) | 2 | 3.25 | 1,708 |
EXPER
| Expertise of main owner (years) | 23 | 23.34 | 1,708 | |
AGE
| Age of main owner (years) | 53 | 53.50 | 1,708 | |
Borrower characteristics | |||||
SALES
| Log of total sales (USD) | 14.65 | 14.45 | 1,752 | |
TA
| Log of total assets (USD) | 13.67 | 13.51 | 1,751 | |
FIRM_AGE
| Age of firm (years) | 16 | 18.28 | 1,761 | |
URBAN
| Firm comes from metropolitan area (dummy) | 1 | 0.77 | 1,761 | |
WHITE
| Main owner is White (dummy) | 1 | 0.95 | 1,708 | |
FEMALE
| Main owner is female (dummy) | 0 | 0.16 | 1,708 | |
MANAGE
| Main owner is manager (dummy) | 1 | 0.83 | 1,708 | |
NUMBANK
| Log of the number of bank relationships | 1.10 | 1.12 | 1,760 | |
Bank relationship characteristics | |||||
DURATION
| Log of the length of the relationship (months) | 4.27 | 3.89 | 1,761 | |
DISTANCE
| Log of the bank–borrower distance (miles) | 1.79 | 2.06 | 1,760 | |
CHECK
| Existence of a checking account (dummy) | 1 | 0.99 | 1,761 | |
SAV
| Existence of a savings account (dummy) | 0 | 0.33 | 1,761 | |
CREDIT_LINE
| Existence of a line of credit (dummy) | 1 | 0.78 | 1,761 | |
Loan terms | |||||
SPREAD
| Spread on most recent loan (percentage pts) | 3.23 | 3.38 | 1,761 | |
COLLAT
| Loan is secured (dummy) | 1 | 0.55 | 1,761 | |
Competition |
HHI
| Hirschman–Herfindahl index, scale from 1 (low concentration) to 3 (high concentration) | 2 | 2.41 | 1,761 |
3.2 Defining borrower bargaining power
4 Empirical results
4.1 Univariate results
Information | Measure of borrower bargaining power | ||
---|---|---|---|
POWER1
|
POWER2
|
POWER3
| |
Panel A: German sample
| |||
Hard | |||
FINRAT
| −0.09** | −0.01 | −0.07* |
Soft | |||
MGRAT
| −0.19*** | −0.16*** | −0.19*** |
Size | |||
LARGE
| 0.13*** | 0.13*** | 0.18*** |
Panel B: US sample
| |||
Hard | |||
CREDIT_SCORE
| −0.00 | −0.04** | −0.03 |
Soft | |||
EDU
| −0.05** | −0.02 | −0.06** |
EXPER
| 0.08*** | −0.07*** | 0.01 |
AGE
| 0.17*** | −0.03 | 0.03 |
Size | |||
LARGE
| 0.17*** | −0.19*** | −0.01 |
4.2 Multivariate results
Dep. var.: | Model I (probit) | Model II (probit) | Model III (ordered probit) | Model IV (ordered probit) | ||||
---|---|---|---|---|---|---|---|---|
POWER1
|
POWER1
|
POWER3
|
POWER3
| |||||
Coeff. |
P value | Coeff. |
P value | Coeff. |
P value | Coeff. |
P value | |
Panel A: German sample | ||||||||
FINRAT
| 0.0570 | 0.240 | 0.0943 | 0.122 | 0.0419 | 0.307 | 0.0626 | 0.201 |
MGRAT
| −0.1943*** | 0.004 | −0.2398*** | 0.004 | −0.1629*** | 0.006 | −0.1471** | 0.040 |
SALES
| 0.3128*** | 0.002 | 0.2178*** | 0.008 | ||||
HOUSEBANK
| −0.1017 | 0.577 | −0.0892 | 0.575 | ||||
NUMBANK
| −0.1644 | 0.192 | 0.0489 | 0.741 | ||||
DURATION
| −0.1253 | 0.207 | −0.0982 | 0.329 | ||||
Bank fixed effects | Yes | Yes | Yes | Yes | ||||
Year fixed effects | Yes | Yes | Yes | Yes | ||||
Obs. | 571 | 424 | 571 | 424 | ||||
Pseudo-R
2
| 0.1920 | 0.2555 | 0.0785 | 0.0970 | ||||
Panel B: US sample | ||||||||
CREDIT_SCORE
| 0.0122 | 0.565 | 0.0128 | 0.556 | −0.0226 | 0.238 | −0.0286 | 0.139 |
EDU
| −0.0426*** | 0.007 | −0.0295* | 0.069 | −0.0342** | 0.016 | −0.0387*** | 0.007 |
EXPER
| 0.0088*** | 0.001 | 0.0072** | 0.014 | 0.0006 | 0.807 | 0.0022 | 0.406 |
SALES
| 0.0953*** | 0.000 | −0.0106 | 0.491 | ||||
NUMBANK
| −0.0185 | 0.821 | −0.0708 | 0.328 | ||||
WHITE
| −0.0946 | 0.500 | −0.0180 | 0.870 | ||||
FEMALE
| −0.0781 | 0.373 | −0.1258 | 0.103 | ||||
DURATION
| −0.0684*** | 0.001 | −0.0029 | 0.870 | ||||
DISTANCE
| −0.0053 | 0.795 | −0.0245 | 0.147 | ||||
HHI_2
| 0.0634 | 0.630 | 0.0372 | 0.761 | ||||
HHI_3
| 0.0039 | 0.977 | −0.0833 | 0.494 | ||||
Obs. | 1,703 | 1,695 | 1,703 | 1,695 | ||||
Pseudo-R
2
| 0.0073 | 0.0252 | 0.0023 | 0.0062 |
4.3 Additional empirical checks
Dep. var.: | Model I (probit) | Model II (ordered probit) | ||
---|---|---|---|---|
POWER1
|
POWER3
| |||
Coeff. |
P-value | Coeff. |
P-value | |
Panel A: German sample | ||||
HMS
| 0.1269** | 0.033 | 0.0835* | 0.082 |
SALES
| 0.3308*** | 0.001 | 0.2341*** | 0.004 |
HOUSEBANK
| −0.0989 | 0.592 | −0.0910 | 0.567 |
NUMBANK
| −0.1676 | 0.181 | 0.0437 | 0.766 |
DURATION
| −0.1161 | 0.248 | −0.0972 | 0.336 |
Bank fixed effects | Yes | Yes | ||
Year fixed effects | Yes | Yes | ||
Obs. | 424 | 430 | ||
Pseudo-R
2
| 0.2481 | 0.1005 | ||
Panel B: US sample | ||||
HMS
| 0.0955** | 0.041 | 0.0750* | 0.069 |
SALES
| 0.1057*** | 0.000 | −0.0010 | 0.947 |
NUMBANK
| −0.0153 | 0.852 | −0.0684 | 0.345 |
WHITE
| −0.1326 | 0.343 | −0.0280 | 0.789 |
FEMALE
| −0.0449 | 0.602 | −0.1092 | 0.152 |
DURATION
| −0.0594*** | 0.003 | 0.0020 | 0.906 |
DISTANCE
| −0.0059 | 0.769 | −0.0265 | 0.116 |
HHI_2
| 0.0641 | 0.627 | 0.0392 | 0.747 |
HHI_3
| 0.0071 | 0.0957 | −0.00754 | 0.533 |
Obs. | 1,695 | 1,695 | ||
Pseudo-R
2
| 0.0231 | 0.0041 |
Dep. var.: | Model I (probit) | Model II (probit) | ||
---|---|---|---|---|
POWER1
t
|
POWER1
t
| |||
Coeff. |
P-value | Coeff. |
P-value | |
POWER1
t − 1
| 0.6241*** | 0.000 | 0.7963*** | 0.000 |
POWER1
t − 2
| 0.2230 | 0.173 | ||
SALES
| 0.2720*** | 0.001 | 0.2131** | 0.022 |
HOUSEBANK
| 0.0205 | 0.886 | 0.1295 | 0.437 |
NUMBANK
| 0.0351 | 0.748 | −0.0423 | 0.751 |
DURATION
| −0.1438* | 0.070 | −0.0690 | 0.474 |
Bank fixed effects | Yes | Yes | ||
Year fixed effects | Yes | Yes | ||
Obs. | 550 | 382 | ||
Pseudo-R
2
| 0.1179 | 0.1545 |
Panel A: German sample | ||||||
---|---|---|---|---|---|---|
Dep. var.: | Model I (probit) | Model II (probit) | Model III (probit) | |||
DEF
t + 1
|
DEF
t + 1
|
DEF
t + 1
| ||||
Coeff. |
P-value | Coeff. |
P-value | Coeff. |
P-value | |
FINRAT
| 0.34*** | 0.000 | 0.33*** | 0.000 | ||
MGRAT
| 0.28*** | 0.000 | 0.18*** | 0.007 | ||
Bank fixed effects | Yes | Yes | Yes | |||
Year fixed effects | Yes | Yes | Yes | |||
Obs. | 572 | 572 | 572 | |||
Pseudo-R
2
| 0.2310 | 0.1721 | 0.2558 |
Panel B: US sample | ||||||
---|---|---|---|---|---|---|
Dep. var.: | Model I (probit) | Model II (probit) | Model III (probit) | |||
DEF
|
DEF
|
DEF
| ||||
Coeff. |
P-value | Coeff. |
P-value | Coeff. |
P-value | |
CREDIT_SCORE
| 0.32*** | 0.000 | 0.33*** | 0.000 | ||
EDU
| 0.14** | 0.041 | 0.13* | 0.069 | ||
Obs. | 1,703 | 1,703 | 1,703 | |||
Pseudo-R
2
| 0.1096 | 0.0023 | 0.1094 |