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Bank Information and Firm Growth. Microeconomic Evidence from the US Credit Market

Author

Listed:
  • Degryse, Hans

    (KU Leuven & CEPR)

  • Kokas, Sotirios

    (University of Essex)

  • Minetti, Raoul

    (Michigan State University, Department of Economics)

  • Peruzzi, Valentina

    (Sapienza University of Rome)

Abstract

We investigate the impact that banks’ information on borrowing firms has on firm-level growth using matched bank-firm data from the U.S. credit market. Exploiting the structure of lending syndicates to construct proxies for bank information, we find consistent evidence that banks’ information spurs firms’ tangible and intangible investments, as well as promoting better growth outcomes. We find limited evidence of banks’ exploitation of informational monopolies that could deter firms’ investment, even when banks hold significant credit market power. Banks’ information does not appear to bias firm growth towards capital-intensive investments, but rather fosters employment growth.

Suggested Citation

  • Degryse, Hans & Kokas, Sotirios & Minetti, Raoul & Peruzzi, Valentina, 2022. "Bank Information and Firm Growth. Microeconomic Evidence from the US Credit Market," Working Papers 2022-3, Michigan State University, Department of Economics.
    • Handle: RePEc:ris:msuecw:2022_003
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    More about this item

    Keywords

    Firm Growth; Banks; Information; Syndicates;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance

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