Direct Lenders in the U.S. Middle Market

71 Pages Posted: 3 May 2020 Last revised: 18 Apr 2024

See all articles by Tetiana Davydiuk

Tetiana Davydiuk

Johns Hopkins University - Carey Business School

Tatyana Marchuk

BI Norwegian Business School; Centre for Economic Policy Research (CEPR)

Samuel Rosen

Temple University, Fox School of Business

Date Written: April 7, 2020

Abstract

This paper studies the rise of direct lending using a comprehensive dataset of investments by business development companies (BDC). 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 firm-level data, we further document that firms' access to BDC funding stimulates their employment growth and patenting activity. Beyond credit provision, BDCs contribute to firm growth through managerial assistance.

Keywords: business development companies, direct lending, private debt, middle market, economic growth

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). Journal of Financial Economics (JFE), Forthcoming, Available at SSRN: https://ssrn.com/abstract=3568718 or http://dx.doi.org/10.2139/ssrn.3568718

Tetiana Davydiuk (Contact Author)

Johns Hopkins University - Carey Business School ( email )

100 International Drive
Baltimore, MD 21202
United States

Tatyana Marchuk

BI Norwegian Business School ( email )

Nydalsveien 37
Oslo, 0442
Norway

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

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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