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Credit market competition, collateral and firms' finance

  • Gabriel Jiménez


    (Banco de España)

  • Vicente Salas-Fumás


    (Banco de España
    Universidad de Zaragoza)

  • Jesús Saurina


    (Banco de España)

Registered author(s):

    This paper investigates the relationship between credit market competition and the availability of bank credit for firms of unobserved credit quality when firms pledge collateral to secure the loans. Loan data from the Spanish Credit Register shows that the average credit quality of borrowers that get loans in a provincial market decreases with market concentration (which is shown to be positively correlated with market power) and with the availability of collateral, although the marginal effect of each variable decreases for higher values of the other. We also find that credit lines' interest rates increase with the availability of collateral, but the increase is lower for banks operating in more concentrated credit markets.Therefore market power in credit markets and collateral appear as substitutes to increase the availability of bank finance under asymmetric information.

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    File Function: First version, June 2006
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    Paper provided by Banco de Espa�a in its series Banco de Espa�a Working Papers with number 0612.

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    Length: 28 pages
    Date of creation: Jun 2006
    Date of revision:
    Handle: RePEc:bde:wpaper:0612
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    1. Dolado, Juan J. & Jansen, Marcel & Jimeno, Juan F., 2005. "Dual Employment Protection Legislation: A Framework for Analysis," IZA Discussion Papers 1564, Institute for the Study of Labor (IZA).
    2. Fabiani, Silvia & Druant, Martine & Hernando, Ignacio & Kwapil, Claudia & Landau, Bettina & Loupias, Claire & Martins, Fernando & Matha, Thomas & Sabbatini, Roberto & Stahl, Harald & Stokman, Ad, 2006. "What Firms' Surveys Tell Us about Price-Setting Behavior in the Euro Area," MPRA Paper 808, University Library of Munich, Germany.
    3. S. Fabiani & M. Druant & I. Hernando & C. Kwapil & B. Landau & C. Loupias & F. Martins & T. Mathä & R. Sabbatini & H. Stahl & A. Stokman, 2005. "The pricing behaviour of firms in the euro area : new survey evidence," Working Paper Research 76, National Bank of Belgium.
    4. Camacho, Maximo & Pérez-Quirós, Gabriel, 2005. "Jump-and-Rest Effects of US Business Cycles," CEPR Discussion Papers 4975, C.E.P.R. Discussion Papers.
    5. Enrique Alberola & Luis Molina & Daniel Navia, 2005. "Say You Fix, Enjoy And Relax The Deleterious Effect Of Peg Announcements On Fiscal Discipline," International Finance 0509001, EconWPA.
    6. Ignacio García-Pérez & Juan F. Jimeno, 2005. "Public sector wage gaps in Spanish regions," Banco de Espa�a Working Papers 0526, Banco de Espa�a.
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