Scandinavian Working Papers in Economics

Working Papers,
Lund University, Department of Economics

No 2013:11: Investment in Relationship-Specific Assets: Does Finance Matter?

Martin Strieborny () and Madina Kukenova ()
Additional contact information
Martin Strieborny: Department of Economics, Lund University, Postal: Department of Economics, School of Economics and Management, Lund University, Box 7082, S-220 07 Lund, Sweden
Madina Kukenova: International Trade Centre - Geneva

Abstract: Existing literature highlights opportunistic behavior as the main reason why rational agents underinvest in relationship-specific assets (the hold-up problem). However, a supplier would also be reluctant to undertake relationship-specific investment if she cannot observe financial stability or planning horizon of a buyer. By combining insights from research on relationship-specific investment and signaling role of financial intermediaries, we argue that a strong banking sector can alleviate these information asymmetries between buyers and suppliers. We empirically confirm this hypothesis by showing that industries dependent on relationship-specific investment from their suppliers grow disproportionately faster in countries with a strong banking sector.

Keywords: …nancial development; relationship-speci…c investment; growth

JEL-codes: G21; O16; O40

37 pages, April 24, 2013

Full text files

WP13_11.pdf PDF-file 

Download statistics

Questions (including download problems) about the papers in this series should be directed to David Edgerton ()
Report other problems with accessing this service to Sune Karlsson ().

This page generated on 2018-02-06 14:12:36.