Product Market Imperfections and Loan Commitments.
The author shows, in a model of competitive banks, that the characteristics of loan contracts are affected by product market imperfections in the borrower's industry. A bank loan commitment increases the value of a borrower firm operating in an imperfectly competitive industry and, thus, dominates a simple loan even in the absence of risk sharing considerations and informational asymmetries between the borrower and the bank. While it is individually rational for a firm to obtain a loan commitment, all the firms in that industry taken together are made worse off by the existence of loan commitments. Copyright 1990 by American Finance Association.
Year of publication: |
1990
|
---|---|
Authors: | Maksimovic, Vojislav |
Published in: |
Journal of Finance. - American Finance Association - AFA, ISSN 1540-6261. - Vol. 45.1990, 5, p. 1641-53
|
Publisher: |
American Finance Association - AFA |
Saved in:
Saved in favorites
Similar items by person
-
How important are financing constraints? : the role of finance in the business environment
Ayyagari, Meghana, (2008)
-
Capital structure in repeated oligopolies
Maksimovic, Vojislav, (1988)
-
Product market imperfections and loan commitments
Maksimovic, Vojislav, (1990)
- More ...