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Loans on Sale: Credit Market Seasonality, Borrower Need, and Lender Rents

72 Pages Posted: 24 Jul 2014  

Justin Murfin

Yale University - School of Management

Mitchell A. Petersen

Northwestern University - Kellogg School of Management; National Bureau of Economic Research (NBER)

Date Written: July 2014

Abstract

The market for corporate credit is characterized by significant seasonal variation, both in interest rates and the volume of new lending. Firms borrowing from banks during seasonal "sales" in late spring and fall issue at 19 basis points cheaper than winter and summer borrowers. Issuers during cheap seasons appear to have less immediate or uncertain needs, but are enticed by low rates to engage in precautionary borrowing. High interest rate periods capture borrowers with unanticipated, non-deferrable investment needs. Consistent with models of intertemporal price discrimination, seasonality is strongly associated with market concentration among a few large banks with repeated interactions.

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Suggested Citation

Murfin, Justin and Petersen, Mitchell A., Loans on Sale: Credit Market Seasonality, Borrower Need, and Lender Rents (July 2014). NBER Working Paper No. w20310. Available at SSRN: https://ssrn.com/abstract=2471203

Justin Murfin (Contact Author)

Yale University - School of Management ( email )

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Mitchell A. Petersen

Northwestern University - Kellogg School of Management ( email )

2001 Sheridan Road
Evanston, IL 60208
United States
847-467-1281 (Phone)
847-491-5719 (Fax)

National Bureau of Economic Research (NBER) ( email )

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