Interbank market integration, loan rates, and firm leverage

Alexander Popov and Steven Ongena

Journal of Banking & Finance, 2011, vol. 35, issue 3, 544-559

Abstract: This paper investigates the effect of interbank market integration on small firm finance in the build-up to the 2007-2008 financial crisis. We use a comprehensive data set that contains contract terms on individual loans to 6047 firms across 14 European countries between 1998:01 and 2005:12. We account for the selection that arises in the loan request and approval process. Our findings imply that integration of interbank markets resulted in less stringent borrowing constraints and in substantially lower loan rates. The decrease was strongest in markets with competitive banking sectors. We also find that in the most rapidly integrating markets, firms became substantially overleveraged during the build-up to the crisis.

Keywords: Interbank; markets; Loan; rates; Bank; competition; Firm; leverage (search for similar items in EconPapers)
Date: 2011
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (35)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0378-4266(10)00312-2
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Interbank market integration, loan rates, and firm leverage (2010)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:35:y:2011:i:3:p:544-559

Access Statistics for this article

Journal of Banking & Finance is currently edited by Ike Mathur

More articles in Journal of Banking & Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().