Agency Cost Debt and Lending Market Competition: Is there a Relationship?

Erkki Koskela and R. Stenbacka

University of Helsinki, Department of Economics from Department of Economics

Abstract: We address the question of how lending market competition, measured by the bargaining power of banks, affects the agency costs of debt finance. It is shown that intensified lending market competition will lead to lower lending rates and investment return distributions which are shifted towards lower, but less risky returns. Consequently, it follows that increased lending market competition will reduce the agency cost of debt financing.

Keywords: BANKS; COMPETITION; COSTS; DEBT (search for similar items in EconPapers)
JEL-codes: G21 G34 L11 (search for similar items in EconPapers)
Pages: 20 pages
Date: 1999
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Working Paper: Agency Cost of Debt and Lending Market Competition: Is there a Relationship? (2000)
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Persistent link: https://EconPapers.repec.org/RePEc:fth:helsec:459

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