Bargaining Power Effects in Financial Contracting: A Joint Analysis of Contract Type and Placement Mode Choices: 577 (Lecture Notes in Economics and Mathematical Systems, 577) - Softcover

Rudolph, Kai

Softcover

ISBN 10: 3540344950 ISBN 13: 9783540344957

Publisher: Springer, 2006

Synopsis

This work was accepted as a dissertation by the University of Muenster, Germany, in 2004. It was written while I was a teaching and research assistant at the Department of Banking. I own many debts - personal and intellectual - to Professor Dr. Andreas Pfingsten, my doctoral adviser, for his overall support while I was writing my dissertation. This thesis benefited much from his constructive criticism. I am also grateful that Professor Dr. Klaus Roder, Department of Finance, University of Regensburg, Germany, acted as my second advisor. Furthermore, I want to thank Dr. Alistair Milne, Sir John Cass Business School, City University, Great Britain, since he assisted me during a crucial phase of my dissertation project while I was staying as a visiting scholar at the Marie Curie Training Site in Corporate Finance, Capital Markets and Banking at Cass. This five month visit in London was financially supported by the European Commission (Fellowship Ref. No. HPMT-GH-01-00330-04). I am also indebted to my previous colleagues, mainly Dr. Hendrik Hakenes and Dr. Markus Ricke, for their encouragement and helpful discussions throughout my whole dissertation project. The dissertation also benefited from comments on a first working paper about the dissertation's topic by participants of research seminars at the Universities of Constance, Tuebingen and Osnabrueck, Germany, and at the 2003 Annual Meeting of the European Economic Association, Stockholm, Sweden.

About this title

Synopsis

The primary objective of this book is to demonstrate that a firm's financing decision depends among other things on bargaining power considerations and to illustrate potential reasons for this dependency. Based on a principal-agent analysis where a lender (principal) and a firm (agent) bargain how to finance the firm's risky project, it is shown that: the advantages of debt financing increase with the firm's bargaining power; the favorability of private placements in comparison to public offerings increases with a firm's bargaining power; the firm's contract type and placement mode choice are interrelated and must be treated jointly when determining the firm's optimal financing decision; and in the presence of an ex-ante informational asymmetry about the firm's financing and the lenders' profit alternatives the contract agreement probability depends (in a non-monotonous way) on the firm's bargaining power.

Edition details

• Publisher: Springer
• Publication date: 2006
• Language: English
• ISBN 10: 3540344950
• ISBN 13: 9783540344957
• Binding: Paperback
• Number of pages: 360