The Effects of Bank Market Power in Short-Term and Long-Term Firm Credit Availability and Investment

Carbo-Valverde, Santiago; Mansilla-Fernandez, José Manuel; Fernandez, Francisco Rodriguez

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The Effects of Bank Market Power in Short-Term and Long-Term Firm Credit Availability and Investment

Revista Española de Financiación y Contabilidad, Forthcoming

42 Pages Posted: 27 Sep 2016

See all articles by Santiago Carbo-Valverde

José Manuel Mansilla-Fernandez

Public University of Navarre

Francisco Rodriguez Fernandez

University of Granada

Date Written: September 26, 2016

Abstract

This article investigates the short-term and long-term effects of bank market power on the availability of credit for companies, and on firm investment. Our results suggest that an increase in bank market power reduces firms’ credit availability and investment in the short-term, but firm investment recovers in the long-term. The economic significance of these relationships is found to be larger for SMEs than for other (larger) firms.

Keywords: Bank loans, bank market power, Euler equation, firm investment rate, risk premium

JEL Classification: G21; G31; D40

Suggested Citation: Suggested Citation

Carbo-Valverde, Santiago and Mansilla-Fernandez, José Manuel and Fernandez, Francisco Rodriguez, The Effects of Bank Market Power in Short-Term and Long-Term Firm Credit Availability and Investment (September 26, 2016). Revista Española de Financiación y Contabilidad, Forthcoming, Available at SSRN: https://ssrn.com/abstract=2843512