Evolution of Debt Financing Toward Less Regulated Financial Intermediaries

Fisher College of Business Working Paper No. 2022-03-004, 2022

Charles A. Dice Center Working Paper No. 2022-04, 2022

72 Pages Posted: 6 Jul 2022

See all articles by Isil Erel

Isil Erel

Ohio State University (OSU) - Department of Finance; National Bureau of Economic Research (NBER); European Corporate Governance Institute (ECGI)

Eduard Inozemtsev

The Ohio State University, Fisher College of Business

Date Written: May 6, 2022

Abstract

Nonbank lenders have been playing an increasingly important role in the supply of debt financing, especially post Great Recession. These nonbank financial institutions not only participate in syndicated loans to large businesses but also act as direct lenders to small and mid-sized businesses, providing loans previously were primarily supplied by banks. Moreover, the composition of bondholders has changed, with mutual funds and other less regulated entities having gained nontrivial market shares. What is the extent of nonbank lending? How important are the distortions associated with the varying degrees of regulatory oversight for banks that differentially limit risk-taking across alternative sources of credit? What are the financial stability implications of this transformed landscape of credit markets? This selective review addresses these important questions and also discusses how banks and nonbanks helped provide liquidity to the nonfinancial sector during the COVID-19 pandemic shock.

Keywords: Nonbank, fintech, bank regulation, loan, bond

JEL Classification: G21, G22, G23, G24, G28

Suggested Citation

Erel, Isil and Inozemtsev, Eduard, Evolution of Debt Financing Toward Less Regulated Financial Intermediaries (May 6, 2022). Fisher College of Business Working Paper No. 2022-03-004, 2022, Charles A. Dice Center Working Paper No. 2022-04, 2022, Available at SSRN: https://ssrn.com/abstract=4151880 or http://dx.doi.org/10.2139/ssrn.4151880

Isil Erel (Contact Author)

Ohio State University (OSU) - Department of Finance ( email )

2100 Neil Avenue
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United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
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European Corporate Governance Institute (ECGI) ( email )

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Eduard Inozemtsev

The Ohio State University, Fisher College of Business ( email )

2100 Neil Avenue
Columbus, OH 43210
United States

HOME PAGE: http://https://www.einozemtsev.com/

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