Review of Financial Studies Vol. 35 No. 11 2022
Why Do Firms Borrow Directly from Nonbanks?
Abstract
Analyzing hand-collected credit agreements for a sample of middle-market firms over 2010–2015, we find that one-third of all loans are directly extended by nonbank financial intermediaries. Two-thirds of such nonbank lending can be attributed to bank regulations that constrain banks’ ability to lend to unprofitable and highly levered borrowers. Firms with negative EBITDA and debt/EBITDA greater than six are 32% and 15% more likely to borrow from nonbanks. These firms pay significantly higher interest rates, especially following the 2013 leveraged loan guidance revisions. Nonbank borrowers also receive different nonprice terms compared to firms borrowing from banks.
- DOI
- 10.1093/rfs/hhac016
- Volume
- 35
- Issue
- 11
- Pages
- 4902-4947
- Language
- en
- Sources
- bibtex:phds-export.bib openalex crossref