Competition and the Cost of Debt

This paper empirically investigates how the intensity of product market competitionaffects the cost of debt. Using a large sample of loans to publicly traded US manufac-turing firms, I provide evidence that an intensification of product market competitionamong firms significantly increases the cost of bank loans. The analysis reveals that theeffect is strongest in industries with high illiquidity and specicity of assets. This finding indicates that the liquidation value of assets is an important channel through whichcompetition affects the cost of debt.[...]

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Year of publication:	2010-05-25
Authors:	Valta, Philip
Institutions:	Swiss National Centre of Competence in Research North South <Bern>
Subject:	Kapitalkosten \| Wettbewerb \| market microstructure \| Liquidität \| Vertrag

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Extent:	307200 bytes 46 p. application/pdf
Series:	FINRISK Working Paper Series Working Paper ; No. 624
Type of publication:	Book / Working Paper
Language:	English
Classification:	G32 - Financing Policy; Capital and Ownership Structure ; G34 - Mergers; Acquisitions; Restructuring; Corporate Governance ; Financial theory ; Procurement of capital. General ; Industrial management ; Management of financial services: stock exchange and bank management science (including saving banks) ; Individual Working Papers, Preprints ; No country specification
Source:	USB Cologne (business full texts)

Persistent link: https://www.econbiz.de/10009305077