TY - JOUR
T1 - Inter-market competition and bank loan spreads
T2 - Evidence from the securities offering reform
AU - Gustafson, Matthew Todd Lange
PY - 2018/9/1
Y1 - 2018/9/1
N2 - I provide evidence of a new mechanism by which access to public securities mitigates the bank hold-up problem and reduces loan spreads – it increases a borrower's bargaining power vis-à-vis a lender by offering a bank loan substitute. Difference-in-differences results indicate that loan spreads decline following legislation that makes public securities more attractive, but only when public securities represent a credible substitute for the bank loan (i.e., for term loans taken out by credit rated borrowers). Spreads on revolving lines of credit, which are more complementary with public securities, increase.
AB - I provide evidence of a new mechanism by which access to public securities mitigates the bank hold-up problem and reduces loan spreads – it increases a borrower's bargaining power vis-à-vis a lender by offering a bank loan substitute. Difference-in-differences results indicate that loan spreads decline following legislation that makes public securities more attractive, but only when public securities represent a credible substitute for the bank loan (i.e., for term loans taken out by credit rated borrowers). Spreads on revolving lines of credit, which are more complementary with public securities, increase.
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U2 - 10.1016/j.jbankfin.2018.07.008
DO - 10.1016/j.jbankfin.2018.07.008
M3 - Article
AN - SCOPUS:85050363673
VL - 94
SP - 107
EP - 117
JO - Journal of Banking and Finance
JF - Journal of Banking and Finance
SN - 0378-4266
ER -