Banking, Commerce, and Antitrust

Stefan Arping

Cahiers de Recherches Economiques du Département d'économie from Université de Lausanne, Faculté des HEC, Département d’économie

Abstract: We develop a model in order to explore how a bank's equity stake in a competitor of a borrower affects the financing relationship with the borrower and product market outcomes. The bank's affiliation with the competitor can give rise to anti- or pro-competitive effects. Large equity stakes can facilitate anti-competitive conduct. In sharp contrast, small equity stakes are pro-competitive. The reason is that the bank's equity stake in the competitor hardens the borrower's budget constraint. This alleviates credit rationing problems and enables the borrower to invest more aggressively. These findings suggest that bank equity holdings in industrial firms have non-monotonic effects on product market competition.

Keywords: banking and commerce; equity participations; soft budget constraint; antitrust (search for similar items in EconPapers)
JEL-codes: G24 G28 G33 L4 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2000-08, Revised 2002-05
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

Downloads: (external link)
http://www.hec.unil.ch/deep/textes/00.22bis.pdf (application/pdf)

Related works:
Working Paper: Banking, Commerce, and Antitrust¤ (2002)
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:lau:crdeep:00.22

Access Statistics for this paper

More papers in Cahiers de Recherches Economiques du Département d'économie from Université de Lausanne, Faculté des HEC, Département d’économie Université de Lausanne, Faculté des HEC, Département d’économie, Internef, CH-1015 Lausanne. Contact information at EDIRC.
Bibliographic data for series maintained by Christina Seld ().