Market Discipline in the Direct Lending Space

• 成果类型: Article
• 署名作者: Davydiuk, Tetiana; Marchuk, Tatyana; Rosen, Samuel
• 署名单位: Johns Hopkins University; BI Norwegian Business School; Pennsylvania Commonwealth System of Higher Education (PCSHE); Temple University
• 刊物名称: REVIEW OF FINANCIAL STUDIES
• ISSN/ISSBN: 0893-9454
• DOI: 10.1093/rfs/hhad081
• 发表日期: 2024
• 页码: 1190
• 关键词: Sovereign debt crisis; financial intermediation; BANK; firm; deregulation; constraints; COMPETITION; fragility; prices; IMPACT

摘要

Using the exclusion of business development companies (BDCs) from stock indexes, this paper studies the effectiveness of market discipline in the direct lending space. Amid share sell-offs by institutional investors, a drop in BDCs' valuations limits their ability to raise new equity capital. Following this funding shock, BDCs do not adjust their capital structure. At the same time, they are reducing the risk exposure of their portfolios. We document a greater reduction in risk for BDCs subject to stronger market discipline from their debtholders. BDCs pass through the capital shock to their portfolio firms by reducing their investment intensity.