Bank Concentration and Product Market Competition

Farzad Saidi, Daniel Streitz

Publikation: KonferencebidragPaperForskningpeer review

Resumé

This paper explores how bank concentration affects product market competition of non-financial firms. We argue that sharing common lenders lowers the cost of debt financing in an industry. Exploiting plausibly exogenous variation in banks’ industry market shares stemming from bank mergers, we find that high-market-share lenders charge lower loan rates. This is because common lenders internalize potential adverse effects of higher loan rates on the product market behavior among their competing borrowers. In the aggregate, we show that a higher proportion of firms sharing the same lender and higher credit concentration in an industry lead to lower output. Effects are stronger for industries with competition in strategic substitutes. Our findings support the idea that bank concentration helps firms to achieve less competitive outcomes in the product market.
OriginalsprogEngelsk
Publikationsdato2019
Antal sider45
StatusUdgivet - 2019
BegivenhedThe 79th Annual Meeting of American Finance Association. AFA 2019 - Hilton Atlanta, Atlanta, USA
Varighed: 4 jan. 20196 jan. 2019
Konferencens nummer: 79
https://editorialexpress.com/conference/AFA2019/program/AFA2019.html

Konference

KonferenceThe 79th Annual Meeting of American Finance Association. AFA 2019
Nummer79
LokationHilton Atlanta
LandUSA
ByAtlanta
Periode04/01/201906/01/2019
Internetadresse

Emneord

  • Industry competition
  • Product market
  • Syndicated loans
  • Bank concentration

Citer dette

Saidi, F., & Streitz, D. (2019). Bank Concentration and Product Market Competition. Afhandling præsenteret på The 79th Annual Meeting of American Finance Association. AFA 2019, Atlanta, USA.
Saidi, Farzad ; Streitz, Daniel. / Bank Concentration and Product Market Competition. Afhandling præsenteret på The 79th Annual Meeting of American Finance Association. AFA 2019, Atlanta, USA.45 s.
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Saidi, F & Streitz, D 2019, 'Bank Concentration and Product Market Competition' Paper fremlagt ved The 79th Annual Meeting of American Finance Association. AFA 2019, Atlanta, USA, 04/01/2019 - 06/01/2019, .

Bank Concentration and Product Market Competition. / Saidi, Farzad; Streitz, Daniel.

2019. Afhandling præsenteret på The 79th Annual Meeting of American Finance Association. AFA 2019, Atlanta, USA.

Publikation: KonferencebidragPaperForskningpeer review

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AU - Streitz, Daniel

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N2 - This paper explores how bank concentration affects product market competition of non-financial firms. We argue that sharing common lenders lowers the cost of debt financing in an industry. Exploiting plausibly exogenous variation in banks’ industry market shares stemming from bank mergers, we find that high-market-share lenders charge lower loan rates. This is because common lenders internalize potential adverse effects of higher loan rates on the product market behavior among their competing borrowers. In the aggregate, we show that a higher proportion of firms sharing the same lender and higher credit concentration in an industry lead to lower output. Effects are stronger for industries with competition in strategic substitutes. Our findings support the idea that bank concentration helps firms to achieve less competitive outcomes in the product market.

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KW - Product market

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KW - Industry competition

KW - Product market

KW - Syndicated loans

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Saidi F, Streitz D. Bank Concentration and Product Market Competition. 2019. Afhandling præsenteret på The 79th Annual Meeting of American Finance Association. AFA 2019, Atlanta, USA.