Inter-Market Competition and Bank Loan Spreads: Evidence from The Securities Offering Reform

37 Pages Posted: 23 Aug 2011 Last revised: 3 Aug 2018

See all articles by Matthew Gustafson

Matthew Gustafson

Pennsylvania State University - Smeal College of Business

Date Written: June 15, 2018

Abstract

I provide evidence of a new mechanism by which access to public securities mitigates the bank hold-up problem and reduces loan spreads – it increases a borrower’s bargaining power vis-à-vis a lender by offering a bank loan substitute. Difference-in-differences results indicate that loan spreads decline following legislation that makes public securities more attractive, but only when public securities represent a credible substitute for the bank loan (i.e., for term loans taken out by credit rated borrowers). Spreads on revolving lines of credit, which are more complementary with public securities, increase.

Keywords: Bank Loans, Bank Competition, Banking Relationships, Public Debt Market, Shelf Registrations

Suggested Citation

Gustafson, Matthew, Inter-Market Competition and Bank Loan Spreads: Evidence from The Securities Offering Reform (June 15, 2018). Journal of Banking and Finance, Forthcoming; 24th Australasian Finance and Banking Conference 2011 Paper. Available at SSRN: https://ssrn.com/abstract=1914867 or http://dx.doi.org/10.2139/ssrn.1914867

Matthew Gustafson (Contact Author)

Pennsylvania State University - Smeal College of Business ( email )

East Park Avenue
University Park, PA 16802
United States

Register to save articles to
your library

Register

Paper statistics

Downloads
191
rank
155,709
Abstract Views
1,288
PlumX Metrics
!

Under construction: SSRN citations will be offline until July when we will launch a brand new and improved citations service, check here for more details.

For more information