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Does Product Market Competition Increase Credit Availability?

Author

Listed:
  • Cerasi Vittoria

    () (Universita degli Studi di Milano-Bicocca)

  • Fedele Alessandro

    () (Università degli Studi di Brescia)

Abstract

With asymmetric information between investors and firms, credit availability is affected by the resale value of collateralized productive assets. If liquidation occurs, investors recover a greater value the higher the probability to find a buyer and the higher his willingness to pay to use the assets for production. We extend the idea of complementarities among firms in the same industry (as in Shleifer and Vishny, 1992) to study under which conditions credit availability is enhanced by competition in the product market when assets are industry specific.

Suggested Citation

  • Cerasi Vittoria & Fedele Alessandro, 2011. "Does Product Market Competition Increase Credit Availability?," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 11(1), pages 1-27, July.
  • Handle: RePEc:bpj:bejeap:v:11:y:2011:i:1:n:41
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    References listed on IDEAS

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    1. Shleifer, Andrei & Vishny, Robert W, 1992. " Liquidation Values and Debt Capacity: A Market Equilibrium Approach," Journal of Finance, American Finance Association, vol. 47(4), pages 1343-1366, September.
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    6. Gavazza, Alessandro, 2010. "Asset liquidity and financial contracts: Evidence from aircraft leases," Journal of Financial Economics, Elsevier, vol. 95(1), pages 62-84, January.
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    8. Efraim Benmelech & Nittai K. Bergman, 2011. "Bankruptcy and the Collateral Channel," Journal of Finance, American Finance Association, vol. 66(2), pages 337-378, April.
    9. Brander, James A. & Lewis, Tracy R., 1986. "Oligopoly and Financial Structure: The Limited Liability Effect," American Economic Review, American Economic Association, vol. 76(5), pages 956-970, December.
    10. Oliver Hart & John Moore, 1994. "A Theory of Debt Based on the Inalienability of Human Capital," The Quarterly Journal of Economics, Oxford University Press, vol. 109(4), pages 841-879.
    11. Jean Tirole, 2006. "The Theory of Corporate Finance," Post-Print hal-00173191, HAL.
    12. Heitor Almeida & Murillo Campello, 2007. "Financial Constraints, Asset Tangibility, and Corporate Investment," Review of Financial Studies, Society for Financial Studies, vol. 20(5), pages 1429-1460, 2007 12.
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    Cited by:

    1. Vittoria Cerasi & Alessandro Fedele & Raffaele Miniaci, 2015. "Do your Rivals Enhance your Access to Credit? Theory and Evidence," BEMPS - Bozen Economics & Management Paper Series BEMPS29, Faculty of Economics and Management at the Free University of Bozen.
    2. Vittoria Cerasi & Alessandro Fedele & Raffaele Miniaci, 2013. "Product market competition and collateralized debt," Working Papers 238, University of Milano-Bicocca, Department of Economics, revised Mar 2013.
    3. repec:kap:sbusec:v:49:y:2017:i:2:d:10.1007_s11187-017-9838-x is not listed on IDEAS

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