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Investment in Relationship-Specific Assets: Does Finance Matter?

Strieborny, Martin LU and Kukenova, Madina (2016) In Review of Finance 20(4). p.1487-1515
Abstract
Banks (but not stock markets) promote economic growth by facilitating relationship-specific investment between buyers and suppliers of intermediate goods. Combined insights from literature on signaling role of banks and on relationship-specific investment motivate this economic channel: A supplier is reluctant to undertake relationship-specific investment as she cannot observe financial stability and planning horizon of buyer. Banks can mitigate this information asymmetry. Empirical results from 28 industries in 90 countries confirm that industries dependent on relationship-specific investment from their suppliers grow disproportionately faster in countries with a well-developed banking sector. The channel works via increased entry of new... (More)
Banks (but not stock markets) promote economic growth by facilitating relationship-specific investment between buyers and suppliers of intermediate goods. Combined insights from literature on signaling role of banks and on relationship-specific investment motivate this economic channel: A supplier is reluctant to undertake relationship-specific investment as she cannot observe financial stability and planning horizon of buyer. Banks can mitigate this information asymmetry. Empirical results from 28 industries in 90 countries confirm that industries dependent on relationship-specific investment from their suppliers grow disproportionately faster in countries with a well-developed banking sector. The channel works via increased entry of new firms and higher capital accumulation. (Less)
Please use this url to cite or link to this publication:
author
organization
publishing date
type
Contribution to journal
publication status
published
subject
keywords
banks and real economy, relationship-specific investment, economic growth, G21 , G10 , O16 , O40
in
Review of Finance
volume
20
issue
4
pages
29 pages
publisher
Oxford University Press
external identifiers
  • scopus:84977103585
  • wos:000379777900007
ISSN
1572-3097
DOI
10.1093/rof/rfv049
language
English
LU publication?
yes
id
096e8b4c-9eea-402e-978d-10933fe99a0f (old id 8245142)
alternative location
http://rof.oxfordjournals.org/content/early/2015/10/22/rof.rfv049.abstract
date added to LUP
2015-12-03 10:27:22
date last changed
2017-11-12 03:37:35
@article{096e8b4c-9eea-402e-978d-10933fe99a0f,
  abstract     = {Banks (but not stock markets) promote economic growth by facilitating relationship-specific investment between buyers and suppliers of intermediate goods. Combined insights from literature on signaling role of banks and on relationship-specific investment motivate this economic channel: A supplier is reluctant to undertake relationship-specific investment as she cannot observe financial stability and planning horizon of buyer. Banks can mitigate this information asymmetry. Empirical results from 28 industries in 90 countries confirm that industries dependent on relationship-specific investment from their suppliers grow disproportionately faster in countries with a well-developed banking sector. The channel works via increased entry of new firms and higher capital accumulation.},
  author       = {Strieborny, Martin and Kukenova, Madina},
  issn         = {1572-3097},
  keyword      = {banks and real economy,relationship-specific investment,economic growth,G21  ,G10    ,O16   ,  O40},
  language     = {eng},
  number       = {4},
  pages        = {1487--1515},
  publisher    = {Oxford University Press},
  series       = {Review of Finance},
  title        = {Investment in Relationship-Specific Assets: Does Finance Matter?},
  url          = {http://dx.doi.org/10.1093/rof/rfv049},
  volume       = {20},
  year         = {2016},
}