The Effect of Credit Market Competition on Lending Relationships

1995/05/01 by Mitchell A. Petersen, M. A. Petersen, Raghuram G. Rajan +1 · 12 citations
Economics, Econometrics and Finance · Business, Management and Accounting · #Banking stability, regulation, efficiency #Corporate Finance and Governance #Working Capital and Financial Performance

paper · doi:10.2307/2118445

Abstract

This paper provides a simple framework showing that the extent of competition in credit markets is important in determining the value of lending relationships. Creditors are more likely to finance credit-constrained firms when credit markets are concentrated because it is easier for these creditors to internalize the benefits of assisting the firms. The paper offers evidence from small business data in support of this hypothesis.

Citations

• Financial Intermediation and Delegated Monitoring
• The Benefits of Lending Relationships: Evidence from Small Business Data

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• Is there life after product quality failures? Evidence from employment decisions
• Access to banks and external capital acquisition: perceived innovation obstacles
• Second–Order Gender Effects: The Case of U.S. Small Business Borrowing Cost
• Financial Statement Readability and Firm Debt Choice
• Income inequality, banking competition, and monetary policy

Related

• The Benefits of Lending Relationships: Evidence from Small Business Data
• Relationship Lending and Lines of Credit in Small Firm Finance
• How Bank Competition Affects Firms' Access to Finance
• Does Borrowing from Banks Cost More than Borrowing from the Market?
• Collateral and Rationing: Sorting Equilibria in Monopolistic and Competitive Credit Markets