Bank Market Power and Firm Finance: Evidence from Bank and Loan Level Data

We present new measures of market power for the banking industry in Colombia and estimate their effect on the cost of credit for non-financial firms. Our results suggest that bank competition increased during the 2006-2008 period even as concentration increased but decreased thereafter. Using a uniq...

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Autores:
Gomez-Gonzalez, Jose E.
Tamayo, Cesar E.
Valencia, Oscar M.
Tipo de recurso:
Fecha de publicación:
2019
Institución:
Universidad EAFIT
Repositorio:
Repositorio EAFIT
Idioma:
eng
OAI Identifier:
oai:repository.eafit.edu.co:10784/13833
Acceso en línea:
http://hdl.handle.net/10784/13833
Palabra clave:
Bank competition
market power
Boone
Lerner
Colombia
cost of firm finance
loan-level data.
Rights
License
Acceso abierto
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spelling Medellín de: Lat: 06 15 00 N degrees minutes Lat: 6.2500 decimal degrees Long: 075 36 00 W degrees minutes Long: -75.6000 decimal degrees2019-09-03T20:08:32Z2019-08-292019-09-03T20:08:32Zhttp://hdl.handle.net/10784/13833G21D22O16We present new measures of market power for the banking industry in Colombia and estimate their effect on the cost of credit for non-financial firms. Our results suggest that bank competition increased during the 2006-2008 period even as concentration increased but decreased thereafter. Using a unique combination of loan, firm and bank-level data sets we are also able to show that banks loosing overall market power –measured by the average price-cost margin– decrease interest rates to small firms, but increase rates to firms with which they have the oldest credit relationships. This suggests (i) the existence of market power that is specific to the bank-firm re lationship (i .e., informa-tional lock-in and hold-up problems due to switching costs), and (ii) that size may be capturing other firm attributes such as observable risk, scale effects or implicit collateral.engUniversidad EAFITEscuela de Economía y FinanzasBank Market Power and Firm Finance: Evidence from Bank and Loan Level DataworkingPaperinfo:eu-repo/semantics/workingPaperDocumento de trabajo de investigacióndrafthttp://purl.org/coar/version/c_b1a7d7d4d402bccehttp://purl.org/coar/resource_type/c_8042Acceso abiertohttp://purl.org/coar/access_right/c_abf2Bank competitionmarket powerBooneLernerColombiacost of firm financeloan-level data.ctamayot@eafit.edu.coGomez-Gonzalez, Jose E.Tamayo, Cesar E.Valencia, Oscar M.LICENSElicense.txtlicense.txttext/plain; charset=utf-82556https://repository.eafit.edu.co/bitstreams/816f344b-1d85-43e6-8f89-6f38d34532b2/download76025f86b095439b7ac65b367055d40cMD51ORIGINALWP_2019_11_Jose_E_Gomez-Gonzalez_Cesar_E_Tamayo_ Oscar_M_Valencia.pdfWP_2019_11_Jose_E_Gomez-Gonzalez_Cesar_E_Tamayo_ Oscar_M_Valencia.pdfWorking paperapplication/pdf976996https://repository.eafit.edu.co/bitstreams/ffbe1cb6-ac03-47fa-af7a-fafc861ac73d/downloadcc3bb6fa8f6960ce047085d6a14b282cMD5210784/13833oai:repository.eafit.edu.co:10784/138332024-03-05 14:06:15.243open.accesshttps://repository.eafit.edu.coRepositorio Institucional Universidad EAFITrepositorio@eafit.edu.co
dc.title.eng.fl_str_mv Bank Market Power and Firm Finance: Evidence from Bank and Loan Level Data
title Bank Market Power and Firm Finance: Evidence from Bank and Loan Level Data
spellingShingle Bank Market Power and Firm Finance: Evidence from Bank and Loan Level Data
Bank competition
market power
Boone
Lerner
Colombia
cost of firm finance
loan-level data.
title_short Bank Market Power and Firm Finance: Evidence from Bank and Loan Level Data
title_full Bank Market Power and Firm Finance: Evidence from Bank and Loan Level Data
title_fullStr Bank Market Power and Firm Finance: Evidence from Bank and Loan Level Data
title_full_unstemmed Bank Market Power and Firm Finance: Evidence from Bank and Loan Level Data
title_sort Bank Market Power and Firm Finance: Evidence from Bank and Loan Level Data
dc.creator.fl_str_mv Gomez-Gonzalez, Jose E.
Tamayo, Cesar E.
Valencia, Oscar M.
dc.contributor.eafitauthor.none.fl_str_mv ctamayot@eafit.edu.co
dc.contributor.author.none.fl_str_mv Gomez-Gonzalez, Jose E.
Tamayo, Cesar E.
Valencia, Oscar M.
dc.subject.keyword.spa.fl_str_mv Bank competition
market power
Boone
Lerner
Colombia
cost of firm finance
loan-level data.
topic Bank competition
market power
Boone
Lerner
Colombia
cost of firm finance
loan-level data.
description We present new measures of market power for the banking industry in Colombia and estimate their effect on the cost of credit for non-financial firms. Our results suggest that bank competition increased during the 2006-2008 period even as concentration increased but decreased thereafter. Using a unique combination of loan, firm and bank-level data sets we are also able to show that banks loosing overall market power –measured by the average price-cost margin– decrease interest rates to small firms, but increase rates to firms with which they have the oldest credit relationships. This suggests (i) the existence of market power that is specific to the bank-firm re lationship (i .e., informa-tional lock-in and hold-up problems due to switching costs), and (ii) that size may be capturing other firm attributes such as observable risk, scale effects or implicit collateral.
publishDate 2019
dc.date.available.none.fl_str_mv 2019-09-03T20:08:32Z
dc.date.issued.none.fl_str_mv 2019-08-29
dc.date.accessioned.none.fl_str_mv 2019-09-03T20:08:32Z
dc.type.eng.fl_str_mv workingPaper
info:eu-repo/semantics/workingPaper
dc.type.coarversion.fl_str_mv http://purl.org/coar/version/c_b1a7d7d4d402bcce
dc.type.coar.fl_str_mv http://purl.org/coar/resource_type/c_8042
dc.type.local.spa.fl_str_mv Documento de trabajo de investigación
dc.type.hasVersion.eng.fl_str_mv draft
dc.identifier.uri.none.fl_str_mv http://hdl.handle.net/10784/13833
dc.identifier.jel.none.fl_str_mv G21
D22
O16
url http://hdl.handle.net/10784/13833
identifier_str_mv G21
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O16
dc.language.iso.eng.fl_str_mv eng
language eng
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dc.rights.local.spa.fl_str_mv Acceso abierto
rights_invalid_str_mv Acceso abierto
http://purl.org/coar/access_right/c_abf2
dc.coverage.spatial.eng.fl_str_mv Medellín de: Lat: 06 15 00 N degrees minutes Lat: 6.2500 decimal degrees Long: 075 36 00 W degrees minutes Long: -75.6000 decimal degrees
dc.publisher.spa.fl_str_mv Universidad EAFIT
dc.publisher.department.spa.fl_str_mv Escuela de Economía y Finanzas
institution Universidad EAFIT
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repository.name.fl_str_mv Repositorio Institucional Universidad EAFIT
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