Direct lenders in the U.S. middle market

Tetiana Davydiuk, Tatyana Marchuk and Samuel Rosen

Journal of Financial Economics, 2024, vol. 162, issue C

Abstract: This paper studies the rise of direct lending using a comprehensive dataset of investments by business development companies (BDC). We exploit three exogenous shocks to credit supply, including new banking regulations and a major finance company collapse, to establish that BDC capital acts as a substitute for traditional financing. Using firm-level data, we further document that firms’ access to BDC funding stimulates their employment growth and patenting activity. Beyond credit provision, BDCs contribute to firm growth through managerial assistance.

Keywords: Business development companies; Direct lending; Private debt; Middle market; Economic growth (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:162:y:2024:i:c:s0304405x24001697

DOI: 10.1016/j.jfineco.2024.103946

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