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Banking, Commerce, and Antitrust Author info | Abstract | Publisher info | Download info | Related research | Statistics Stefan ARPING
We 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 anti- or 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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Paper provided by Université de Lausanne, Faculté des HEC, DEEP in its series Cahiers de Recherches Economiques du Département d'Econométrie et d'Economie politique (DEEP) with number
00.22.
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Length: 28 pages
Date of creation: Aug 2000Date of revision:
May 2002Handle: RePEc:lau:crdeep:00.22Contact details of provider: Postal: Université de Lausanne, Faculté des HEC, DEEP, Internef, CH-1015 Lausanne Phone: ++41 21 692.33.64 Fax: ++41 21 692.33.65 Web page: http://www.hec.unil.ch/deep/publications-english/e-cahiers.htm
For technical questions regarding this item, or to correct its listing, contact: (Claudine Delapierre Saudan).
Keywords: banking and commerce ; equity participations ; soft budget constraint ; antitrust ; Other versions of this item:
Find related papers by JEL classification: 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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