Direct Lenders in the U.S. Middle Market

71 Pages Posted: 3 May 2020 Last revised: 29 Feb 2024

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

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. We also show that BDC allocations are informative about investment strategies of other private debt funds.

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). 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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