Direct Lenders in the U.S. Middle Market

102 Pages Posted: 3 May 2020 Last revised: 4 Jun 2021

See all articles by Tetiana Davydiuk

Tetiana Davydiuk

Carnegie Mellon University - David A. Tepper School of Business

Tatyana Marchuk

BI Norwegian Business School

Samuel Rosen

Temple University, Fox School of Business

Date Written: April 7, 2020

Abstract

The reduction in credit supply from traditional lenders following the 2007--2008 Financial Crisis contributed to a surge of direct lenders and, in particular, business development companies (BDCs). Using a novel hand-collected dataset, we provide the first systematic analysis of the BDC sector. In a difference-in-differences setting, we exploit three exogenous shocks to credit supply, including new banking regulations and a major finance company collapse, to establish that BDC capital acts as a substitute for traditional financing. Using an instrumental variable approach, we further document that access to BDC funding and, more broadly, private debt capital has stimulated economic growth.

Keywords: BDCs, Direct Lending, Middle Market, Real Effects

JEL Classification: G20, G23, G32

Suggested Citation

Davydiuk, Tetiana and Marchuk, Tatyana and Rosen, Samuel, Direct Lenders in the U.S. Middle Market (April 7, 2020). Available at SSRN: https://ssrn.com/abstract=3568718 or http://dx.doi.org/10.2139/ssrn.3568718

Tetiana Davydiuk (Contact Author)

Carnegie Mellon University - David A. Tepper School of Business ( email )

5000 Forbes Avenue
Pittsburgh, PA 15213-3890
United States

Tatyana Marchuk

BI Norwegian Business School ( email )

Nydalsveien 37
Oslo, 0442
Norway

Samuel Rosen

Temple University, Fox School of Business ( email )

Fox School of Business and Management
Philadelphia, PA 19122
United States

HOME PAGE: http://sites.google.com/view/samuel-rosen/

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