The Importance of Being Consulted

Fedele, Alessandro ; Mantovani, Andrea (2010) The Importance of Being Consulted. Bologna: Dipartimento di Scienze economiche DSE, p. 18. DOI 10.6092/unibo/amsacta/4530. In: Quaderni - Working Paper DSE (712). ISSN 2282-6483.
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Abstract

Does management consulting facilitate the access to credit for start-ups? This paper tries to answer the question by developing a theoretical framework where a firm applies for a bank loan to implement a risky project. The probability of success increases if the firm exerts a costly managerial extra-effort, but the bank is unable to observe such an effort: a moral hazard problem may therefore occur. During an economic downturn the project’s expected profitability is likely to be low relatively to the effort cost. In this case we find that credit is granted only if the bank hires a management consultant, even when the latter does not improve the business practice.

Abstract
Document type
Monograph (Working Paper)
Creators
CreatorsAffiliationORCID
Fedele, Alessandro
Mantovani, Andrea
Keywords
management consultancy, moral hazard, bank credit, economic downturn
Subjects
ISSN
2282-6483
DOI
Deposit date
04 Feb 2016 09:05
Last modified
04 Feb 2016 09:05
URI

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