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Bank information monopolies and hold-up effects: International evidence

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  • Shi, Wei-Zhong
  • Ching, Yann-Peng
  • Fok, Robert (Chi-Wing)
  • Chang, Yuanchen

Abstract

We examine whether hold-up effects are confined to the U.S. market. Using an international sample, we investigate whether firms with access to the public debt market pay lower loan spreads. We hypothesize that when firms issue public bonds, they reveal private information of their credit risk, and thus the monopoly power of inside banks decreases, resulting in lower loan spreads. We find extensive evidence to support this conjecture. We also find that hold-up effects are stronger during recessions and more significant in countries with stringent bank regulations but insignificant during banking crises and the 2007–2008 financial crisis.

Suggested Citation

  • Shi, Wei-Zhong & Ching, Yann-Peng & Fok, Robert (Chi-Wing) & Chang, Yuanchen, 2023. "Bank information monopolies and hold-up effects: International evidence," International Review of Economics & Finance, Elsevier, vol. 83(C), pages 286-311.
    • Handle: RePEc:eee:reveco:v:83:y:2023:i:c:p:286-311
    DOI: 10.1016/j.iref.2022.08.026
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    References listed on IDEAS

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    More about this item

    Keywords

    Hold-up effects; Bank-dependent and non-bank dependent borrowers; Loan spreads;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems

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