Does Product Market Competition Increase Credit Availability?
20 Pages Posted: 24 Jan 2010 Last revised: 8 Jun 2013
Date Written: March 2011
When there is asymmetric information between investors and firms, credit availability is affected by the value of collateralized productive assets. If liquidation occurs, investors recover a greater value the higher the probability to find a buyer and the higher his willingness to pay to use the assets for production. We extend the idea of complementarities among firms in the same industry (as in Shleifer and Vishny, 1992) to study under which conditions credit availability is enhanced by competition in the product market.
Keywords: product market competition, credit availability, resale of productive assets
JEL Classification: D82, G33, L14
Suggested Citation: Suggested Citation