The Review of Corporate Finance Studies Vol. 13 No. 4 2024
Banks’ Market Power, Access to Finance, and Leverage
Abstract
How does lending-market competitiveness shape new firms’ financing? Using a unique U.S. representative panel of new firms, we document that in more concentrated local lending markets: (a) new firms are less likely to access credit; (b) new firms have lower leverage; and (c) the best-performing firms are more severely affected by reduced debt financing. We develop a contingent-claims model with monopolistically competitive banks that rationalizes these facts and shows how credit-market conditions determine loan fees and concentration. Our findings highlight banks’ market power as a channel through which the financial sector influences firms’ development and, hence, economic growth.
- DOI
- 10.1093/rcfs/cfae013
- Volume
- 13
- Issue
- 4
- Pages
- 889-930
- Language
- en
- Sources
- bibtex:phds-export.bib openalex crossref