Abstract
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.
| Original language | English (US) |
|---|---|
| Pages (from-to) | 107-117 |
| Number of pages | 11 |
| Journal | Journal of Banking and Finance |
| Volume | 94 |
| DOIs | |
| State | Published - Sep 1 2018 |
Fingerprint
All Science Journal Classification (ASJC) codes
- Finance
- Economics and Econometrics
Cite this
}
Inter-market competition and bank loan spreads : Evidence from the securities offering reform. / Gustafson, Matthew Todd Lange.
In: Journal of Banking and Finance, Vol. 94, 01.09.2018, p. 107-117.Research output: Contribution to journal › Article
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.
UR - http://www.scopus.com/inward/record.url?scp=85050363673&partnerID=8YFLogxK
UR - http://www.scopus.com/inward/citedby.url?scp=85050363673&partnerID=8YFLogxK
U2 - 10.1016/j.jbankfin.2018.07.008
DO - 10.1016/j.jbankfin.2018.07.008
M3 - Article
VL - 94
SP - 107
EP - 117
JO - Journal of Banking and Finance
JF - Journal of Banking and Finance
SN - 0378-4266
ER -