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Do your Rivals Enhance your Access to Credit? Theory and Evidence

Author

Listed:
  • Vittoria Cerasi

    () (University of Milano-Bicocca, Department of Economics, Management and Statistics)

  • Alessandro Fedele

    () (Free University of Bolzano‐Bozen, Faculty of Economics and Management)

  • Raffaele Miniaci

    () (University of Brescia, Department of Economics and Management)

Abstract

In this paper, we unveil a disregarded benefit of product market competition for small and medium enterprises (SMEs). In a model where firms are financed through collateralized bank loans and compete à la Cournot, we introduce a probability of bankruptcy. We investigate how the number of rivals and the existence of outsiders willing to acquire productive assets of distressed incumbents affect the equilibrium share of investment financed with bank credit. Using a sample of Italian SMEs, we find evidence that product market competition impacts positively on the share of investment financed with bank credit only when outsiders are absent. (A shorter version of this working paper has been published in SMALL BUSINESS ECONOMICS)

Suggested Citation

  • 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.
  • Handle: RePEc:bzn:wpaper:bemps29
    as

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    File URL: http://pro1.unibz.it/projects/economics/repec/bemps29.pdf
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    File URL: https://link.springer.com/article/10.1007/s11187-017-9838-x
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    References listed on IDEAS

    as
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    3. Valta, Philip, 2012. "Competition and the cost of debt," Journal of Financial Economics, Elsevier, vol. 105(3), pages 661-682.
    4. Cerasi, Vittoria & Chizzolini, Barbara & Ivaldi, Marc, 2009. "The Impact of Mergers on the Degree of Competition in the Banking Industry," IDEI Working Papers 582, Institut d'Économie Industrielle (IDEI), Toulouse, revised 07 Jun 2012.
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    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    product market competition; collateralized bank loans; productive assets;

    JEL classification:

    • G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis

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