Competition and the cost of debt

• 成果类型: Article
• 署名作者: Valta, Philip
• 署名单位: Hautes Etudes Commerciales (HEC) Paris
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2012.04.004
• 发表日期: 2012
• 页码: 661-682
• 关键词: product market competition; import tariffs; Cost of debt; bank loans

摘要

This paper empirically shows that the cost of bank debt is systematically higher for firms that operate in competitive product markets. Using various proxies for product market competition, and reductions of import tariff rates to capture exogenous changes to a firm's competitive environment, I find that competition has a significantly positive effect on the cost of bank debt. Moreover, the analysis reveals that the effect of competition is greater in industries in which small firms face financially strong rivals, in industries with intense strategic interactions between firms, and in illiquid industries. Overall, these findings suggest that banks price financial contracts by taking into account the risk that arises from product market competition. (C) 2012 Elsevier B.V. All rights reserved.