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Bank market power and firm performance


Ongena, Steven; Delis, Manthos D; Kokas, Sotiris (2017). Bank market power and firm performance. Review of Finance, 21(1):299-326.

Abstract

Does market power of banks affect firm performance? To answer this question we examine 25,236 syndicated loan facilities granted between 2000 and 2010 by 296 banks to 9,029 US non-financial firms. Accounting for both observed and unobserved bank and firm heterogeneity, we find that firms that were recently poorly performing obtain loans from banks with more market power. However, in the year after loan origination market power positively affects firm performance, but only if it is not too high. Our estimates thus suggest that bank market power can facilitate access to credit by poorly-performing firms, yet at the same time also boosts the performance of the firms that obtain credit.

Abstract

Does market power of banks affect firm performance? To answer this question we examine 25,236 syndicated loan facilities granted between 2000 and 2010 by 296 banks to 9,029 US non-financial firms. Accounting for both observed and unobserved bank and firm heterogeneity, we find that firms that were recently poorly performing obtain loans from banks with more market power. However, in the year after loan origination market power positively affects firm performance, but only if it is not too high. Our estimates thus suggest that bank market power can facilitate access to credit by poorly-performing firms, yet at the same time also boosts the performance of the firms that obtain credit.

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Additional indexing

Item Type:Journal Article, refereed, original work
Communities & Collections:03 Faculty of Economics > Department of Banking and Finance
Dewey Decimal Classification:330 Economics
Language:English
Date:March 2017
Deposited On:22 Aug 2017 08:31
Last Modified:09 Dec 2017 01:53
Publisher:Oxford University Press
ISSN:1572-3097
Free access at:Publisher DOI. An embargo period may apply.
Publisher DOI:https://doi.org/10.1093/rof/rfw004
Other Identification Number:merlin-id:12923

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