Persuasion in relationship finance

• 成果类型: Article
• 署名作者: Azarmsa, Ehsan; Cong, Lin William
• 署名单位: University of Chicago; University of Chicago; Cornell University
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2020.06.018
• 发表日期: 2020
• 页码: 818-837
• 关键词: Bayesian persuasion; experimentation; hold-up; information design; Relationship lending; security design; venture capital

摘要

After initial investments, relationship financiers routinely observe interim information about projects before continuing financing them. Meanwhile, entrepreneurs produce information endogenously and issue securities to incumbent insider and competitive outsider investors. In such persuasion games with differentially informed receivers and contingent transfers, entrepreneurs' endogenous experimentation reduces insiders' information monopoly but impedes relationship formation through an information production hold-up. Insiders' information production and interim competition mitigate this hold-up and jointly explain empirical links between competition and relationship lending. Optimal contracts restore first-best outcomes using convertible securities for insiders and residuals for outsiders. Our findings are robust under various extensions and alternative specifications. (C) 2020 Elsevier B.V. All rights reserved.