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Investment in Relationship-Specific Assets: Does Finance Matter?

Strieborny, Martin, Kukenova, Madina·2016·Review of Finance
DOI 10.1093/rof/rfv049
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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 twenty-eight industries in ninety 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.

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Citations

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Metadata

Authors
Strieborny, M., & Kukenova, M.
Affiliations
  • 1 Lund University and
  • 2 Business School of Lausanne and Montreux Business School
Venue
Review of Finance
Publisher
Oxford University Press (OUP)
Published
2015-10-22
Volume
20
Issue
4
Pages
1487-1515
ISSN
  • 1573-692X
  • 1572-3097
DOI
10.1093/rof/rfv049
Cited by
26
References
3
Language
en

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