Banking, Commerce, and Antitrust¤
AbstractWe develop a model in order to explore how a bank’s equity stake in a competitor of a borrower affects the financing relationship with the borrower and product market outcomes. The bank’s affiliation with the competitor can give rise to antior pro–competitive effects. Large equity stakes can facilitate anti–competitive conduct. In sharp contrast, small equity stakes are pro–competitive. The reason is that the bank’s equity stake in the competitor hardens the borrower’s budget constraint. This alleviates credit rationing problems and enables the borrower to invest more aggressively. These findings suggest that bank equity holdings in industrial firms have non–monotonic effects on product market competition.
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Bibliographic InfoPaper provided by International Center for Financial Asset Management and Engineering in its series FAME Research Paper Series with number rp19.
Date of creation: May 2002
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Other versions of this item:
- Stefan ARPING, 2000. "Banking, Commerce, and Antitrust," Cahiers de Recherches Economiques du DÃ©partement d'EconomÃ©trie et d'Economie politique (DEEP) 00.22, Université de Lausanne, Faculté des HEC, DEEP, revised May 2002.
- G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
- G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
- G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation
- L4 - Industrial Organization - - Antitrust Issues and Policies
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