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Evolution of Debt Financing toward Less Regulated Financial Intermediaries

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  • Erel, Isil

    (Ohio State University)

  • Inozemtsev, Eduard

    (Ohio State University)

Abstract

Nonbank lenders have been playing an increasingly important role in the supply of debt financing, especially post Great Recession. These nonbank financial institutions not only participate in syndicated loans to large businesses but also act as direct lenders to small and mid-sized businesses, providing loans previously were primarily supplied by banks. Moreover, the composition of bondholders has changed, with mutual funds and other less regulated entities having gained nontrivial market shares. What is the extent of nonbank lending? How important are the distortions associated with the varying degrees of regulatory oversight for banks that differentially limit risk-taking across alternative sources of credit? What are the financial stability implications of this transformed landscape of credit markets? This selective review addresses these important questions and also discusses how banks and nonbanks helped provide liquidity to the nonfinancial sector during the COVID-19 pandemic shock.

Suggested Citation

  • Erel, Isil & Inozemtsev, Eduard, 2022. "Evolution of Debt Financing toward Less Regulated Financial Intermediaries," Working Paper Series 2022-04, Ohio State University, Charles A. Dice Center for Research in Financial Economics.
    • Handle: RePEc:ecl:ohidic:2022-04
    DOI: 10.2139/ssrn.4151880
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    More about this item

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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