IDEAS home Printed from https://ideas.repec.org/a/oup/rfinst/v35y2022i11p4902-4947..html
   My bibliography  Save this article

Why Do Firms Borrow Directly from Nonbanks?

Author

Listed:
  • Sergey Chernenko
  • Isil Erel
  • Robert Prilmeier

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.Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online.

Suggested Citation

  • Sergey Chernenko & Isil Erel & Robert Prilmeier, 2022. "Why Do Firms Borrow Directly from Nonbanks?," The Review of Financial Studies, Society for Financial Studies, vol. 35(11), pages 4902-4947.
    • Handle: RePEc:oup:rfinst:v:35:y:2022:i:11:p:4902-4947.
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1093/rfs/hhac016
    Download Restriction: Access to full text is restricted to subscribers.
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Ahmet Degerli & Jing Wang, 2022. "The Rise of Nonbanks and the Quality of Financial Services: Evidence from Consumer Complaints," Finance and Economics Discussion Series 2022-059, Board of Governors of the Federal Reserve System (U.S.).
    2. Gaffney, Edward & McGeever, Niall, 2022. "The SME-lender relationship network in Ireland," Financial Stability Notes 14/FS/22, Central Bank of Ireland.
    3. Manasa Gopal & Philipp Schnabl, 2022. "The Rise of Finance Companies and FinTech Lenders in Small Business Lending," The Review of Financial Studies, Society for Financial Studies, vol. 35(11), pages 4859-4901.
    4. Eichholtz, Piet & Ongena, Steven & Simeth, Nagihan & Yönder, Erkan, 2023. "Banks, non-banks, and the incorporation of local information in CMBS loan pricing," Journal of Banking & Finance, Elsevier, vol. 154(C).
    5. Mary Chen & Seung Jung Lee & Daniel Neuhann & Farzad Saidi, 2023. "Less Bank Regulation, More Non-Bank Lending," Finance and Economics Discussion Series 2023-026, Board of Governors of the Federal Reserve System (U.S.).

    More about this item

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:oup:rfinst:v:35:y:2022:i:11:p:4902-4947.. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Oxford University Press (email available below). General contact details of provider: https://edirc.repec.org/data/sfsssea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.