Evolution of Debt Financing toward Less Regulated Financial Intermediaries

Isil Erel and Eduard Inozemtsev
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Isil Erel: Ohio State University
Eduard Inozemtsev: Ohio State University

Working Paper Series from Ohio State University, Charles A. Dice Center for Research in Financial Economics

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.

JEL-codes: G21 G22 G23 G24 G28 (search for similar items in EconPapers)
Date: 2022-07
New Economics Papers: this item is included in nep-ban and nep-cfn
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https://dx.doi.org/10.2139/ssrn.4151880

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Persistent link: https://EconPapers.repec.org/RePEc:ecl:ohidic:2022-04

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