Competition in the Project Finance Loan Industry in Europe

22 Pages Posted: 28 May 2021

See all articles by Juan Delgado

Juan Delgado

Global Economics Group; Universidad Carlos III de Madrid - Economics Dpt.

Violeta Morón

Global Economics Group, LLC

Héctor Otero

Global Economics Group, LLC

Date Written: May 25, 2021

Abstract

The market for project finance loans has a special feature: banks do not only compete individually but also through coalitions or “syndicates”. Traditional concentration indicators summarise industry structure based on individual market shares but they fail to capture the dynamics of competition between coalitions. For the same level of concentration, competition will be fiercer if there exist different competing coalitions than if all loans are granted by a single syndicate of banks. We develop a metric of “similarity” between syndicates to assess how similar syndicate composition is in the European project finance loan industry. We find that syndicates are more similar within Spain and Portugal than within Germany and the UK, which might indicate a lower degree of competition in the former. We also find that syndicates are significantly more similar within countries than between countries, which might reflect the lack of market integration and the existence of home bias in the European project finance loan industry.

Keywords: competition, market structure, loan market, bank lending, project finance, syndication, coalitions

JEL Classification: D4, F3, G2, L1, L4

Suggested Citation

Delgado, Juan and Morón, Violeta and Otero, Héctor, Competition in the Project Finance Loan Industry in Europe (May 25, 2021). Available at SSRN: https://ssrn.com/abstract=3852758 or http://dx.doi.org/10.2139/ssrn.3852758

Juan Delgado (Contact Author)

Global Economics Group ( email )

Calle Manzana 7
Madrid, 28015
Spain

HOME PAGE: http://www.globaleconomicsgroup.com

Universidad Carlos III de Madrid - Economics Dpt. ( email )

CL. de Madrid 126
Madrid, Madrid 28903
Spain

Violeta Morón

Global Economics Group, LLC ( email )

1400 S. Dearborn, Suite 400
Chicago, IL 60603
United States

Héctor Otero

Global Economics Group, LLC ( email )

Calle Santa Engracia, 46
Madrid, 28010
Spain

HOME PAGE: http://www.globaleconomicsgroup.com

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