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Banking Sector Deregulation, Bank–Firm Relationships and Corporate Leverage


Braggion, Fabio; Ongena, Steven (2019). Banking Sector Deregulation, Bank–Firm Relationships and Corporate Leverage. Economic Journal, 129(618):765-789.

Abstract

We study the effects of the 1971 deregulation of UK banking on firms’ financial and investment policies. The deregulation was a turning point in the evolution of firm-bank relationships during the twentieth century. Indeed, for more than 80 years prior to deregulation most firms had had a relationship with only one bank: this was no longer the case from 1971 on. Deregulation and intensifying competition in the banking sector spurred firms-in local markets with many banks already active-to increase leverage and to invest more in research and development. Bank debt similarly expanded while trade credit contracted.

Abstract

We study the effects of the 1971 deregulation of UK banking on firms’ financial and investment policies. The deregulation was a turning point in the evolution of firm-bank relationships during the twentieth century. Indeed, for more than 80 years prior to deregulation most firms had had a relationship with only one bank: this was no longer the case from 1971 on. Deregulation and intensifying competition in the banking sector spurred firms-in local markets with many banks already active-to increase leverage and to invest more in research and development. Bank debt similarly expanded while trade credit contracted.

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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:1 February 2019
Deposited On:30 Oct 2019 10:22
Last Modified:30 Oct 2019 10:22
Publisher:Wiley-Blackwell Publishing, Inc.
ISSN:0013-0133
OA Status:Closed
Publisher DOI:https://doi.org/10.1111/ecoj.12569
Official URL:https://academic.oup.com/ej/article/129/618/765/5289458
Other Identification Number:merlin-id:15128

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