BANK INFORMATION MONOPOLIES: EVIDENCE FROM TUNISIA

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Abstract

The purpose of this paper is to examine the problem of bank information monopoly using detailed information on the debt structure of 47 Tunisian non-financial firms over the 1998-2003 period. We find that bank debt is negatively related to agency costs of moral hazard and adverse selection. We argue that there is a potential hold-up problem leading firms that are exposed to information asymmetry to limit bank financing in order to avoid rent extraction from banks. Further, our results suggest that this hold-up problem can be resolved either by issuing public debt or by bank equity participation.

Keywords: Asymmetric Information, Debt Structure, Financial Intermediation, Agency Costs, Hold-Up Problem

How to cite this paper: Ellouze, D., & Abaoub, E. (2008). Bank information monopolies: Evidence from Tunisia. Corporate Ownership & Control, 6(1-3), 357-370. https://doi.org/10.22495/cocv6i1c3p3