Bank Equity Claims in Borrowing Firms and Loan Availability
29 Pages Posted: 22 Jun 2006
Date Written: June 21, 2006
This study investigates empirically the effect that bank equity claims in borrowing firms have on the availability of finance to the firm. The results suggest that allowing banks to hold equity claims in borrowing firms enhance debt availability to the firm. The results are consistent with arguments that equity claims may be helpful in transferring the benefits of an ongoing relationships to the borrowers, and thus eventually also enhance investment efficiency in the economy as a whole. The results, however, also suggest that very small or very large bank equity claims in borrowing firms do not have this impact.
Keywords: Relationship lending, Bank equity claims, Loan availability
JEL Classification: G21, G32
Suggested Citation: Suggested Citation