Why Do Firms Borrow Directly from Nonbanks?

Sergey Chernenko, Isil Erel and Robert Prilmeier

No 26458, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Analyzing hand-collected credit agreements data for a random sample of middle-market firms during 2010-2015, we find that a third of all loans is extended directly by nonbank financial intermediaries. Nonbanks lend to less profitable and more levered firms that undergo larger changes in size around loan origination. The probability of borrowing from a nonbank jumps by 34% as EBITDA falls below zero, an effect that is largely due to bank regulation. Controlling for firm and loan characteristics, nonbank loans carry 190 basis points higher interest rates, suggesting that access to funding, rather than prices, is why firms borrow from nonbanks.

JEL-codes: G21 G23 G30 G32 (search for similar items in EconPapers)
Date: 2019-11
New Economics Papers: this item is included in nep-ban and nep-cfn
Note: CF
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Citations: View citations in EconPapers (5)

Published as Sergey Chernenko & Isil Erel & Robert Prilmeier & Gregor Matvos, 2022. "Why Do Firms Borrow Directly from Nonbanks?," The Review of Financial Studies, vol 35(11), pages 4902-4947.

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