This study examines the relationship between how firms borrow from banks and various corporate financial characteristics in an emerging economy. Using Taiwanese listed firms over the 1990-2002 period, we find, on the one hand, that older firms tend to maintain a close relationship with a single bank without private information disclosure (i.e. without public debt), in order to benefit from efficient monitoring and avoid information leakage. Larger firms, on the other hand, tend to maintain multiple relationships with banks (requiring duplicate or inefficient monitoring and higher agency costs) with public debt (i.e. private information disclosure). Furthermore, older firms seem to exhibit higher profitability than larger firms. Firms with multiple banking relationships appear to have higher leverage, lower performance (Tobin's Q), higher bank debt ratios, lower fixed assets ratios, and higher collateral requirements than those firms with close single banking relationships. Firms with single banking relationships seem to have stronger financial structures and better loan terms than firms with multiple banking relationships. When firms choose to issue public debt, those with single banking relationships will suffer as a result of severely unfavorable loan terms such as higher collateral required and higher earnings volatility. However, on the other hand, they will exhibit a better financial structure, such as a higher Tobin's Q, lower financial risk (leverage) and lower bank debt ratios among all of the sub-groups. Hence, efficient monitoring associated with private information disclosure to the public will lead to better financial characteristics of firms. However, once this close relationship is broken due to the issue of public debt, unfavorable collateral requirements will follow.Interestingly, when firms that maintain multiple banking relationships choose to issue public debt, this sub-group will appear to have the worst financial structure, such as the lowest Tobin's Q, highest financial risk (leverage) and highest bank debt ratios among all the sub-groups. Hence, inefficient monitoring associated with the disclosure of private information to competitors will result in the worst financial characteristics of firms
