Non-bank Loans, Corporate Investment and Firm Performance

62 Pages Posted: 12 Feb 2019 Last revised: 26 Apr 2021

See all articles by Swarnava Biswas

Swarnava Biswas

University of Bristol

Neslihan Ozkan

University of Bristol - School Accounting and Finance, U.K.

Junyang Yin

University of Bristol

Date Written: September 1, 2020

Abstract

In the leveraged loan sector, firms borrowing from non-banks have worse profitability and lower investments following loan origination, compared to observably similar firms borrowing from banks; the negative effects are concentrated in the subset of financially-constrained firms. Our results are consistent with the view that non-banks extract rents from borrowers as the lenders of last resort. The leveraged lending guidance, which resulted in the migration of borrowers from banks to non-banks, led to worse outcomes for the leveraged borrowers, complementing our cross-sectional analysis. Our findings suggest that macroprudential policies which exclusively target the traditional banking sector can have negative consequences.

Keywords: Non-bank lending, Shadow banking sector, Financial constraints, Leveraged lending guidance.

JEL Classification: G21, G23, G30

Suggested Citation

Biswas, Swarnava and Ozkan, Neslihan and Yin, Junyang, Non-bank Loans, Corporate Investment and Firm Performance (September 1, 2020). Available at SSRN: https://ssrn.com/abstract=3327539 or http://dx.doi.org/10.2139/ssrn.3327539

Swarnava Biswas (Contact Author)

University of Bristol ( email )

University of Bristol,
Senate House, Tyndall Avenue
Bristol, BS8 ITH
United Kingdom

Neslihan Ozkan

University of Bristol - School Accounting and Finance, U.K. ( email )

United Kingdom

HOME PAGE: http://https://research-information.bris.ac.uk/en/persons/neslihan-ozkan

Junyang Yin

University of Bristol ( email )

United Kingdom

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