Product market competition and collateralized debt

Vittoria Cerasi, Alessandro Fedele and Raffaele Miniaci

No 238, Working Papers from University of Milano-Bicocca, Department of Economics

Abstract: This paper presents a model where bank credit depends upon borrowers.product market structure. We show that a larger number of competitors in the industry may increase credit availability by enhancing the resale value of the collateralized productive assets. We also study how this bene.t of competition is affected by the existence of outsiders willing to bid for the collateralized productive assets of the insiders. Our model encompasses the standard case of Cournot competition either when the default probability goes to zero or when there are multiple outsiders bidding for the productive assets. We test the empirical implications of the theoretical analysis exploiting information on the access to finance of small and medium Italian firms and find supportive evidence.

Keywords: collateralized loans; product market competition; productive assets resale value (search for similar items in EconPapers)
JEL-codes: D22 G33 L13 (search for similar items in EconPapers)
Pages: 31
Date: 2013-03, Revised 2013-03
New Economics Papers: this item is included in nep-com
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Citations: View citations in EconPapers (1)

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