In this paper, we unveil a disregarded benefit of product market competition for firms. We introduce the probability of bankruptcy in a simple model where firms compete à la Cournot and apply for collateralised bank loans to undertake productive investments. We show that the number of competitors and the existence of outsiders willing to acquire the productive assets of distressed incumbents affect the equilibrium share of investment financed by bank credit. Using a sample of Italian manufacturing firms, mostly small and medium-size enterprises (SMEs), we found evidence showing that the degree of product market competition is positively correlated with the share of investment financed by bank credit only when outsiders are absent

Cerasi, V., Fedele, A., Miniaci, R. (2017). Product Market Competition and Access to Credit. SMALL BUSINESS ECONOMICS, 49(2), 295-318 [10.1007/s11187-017-9838-x].

Product Market Competition and Access to Credit

CERASI, VITTORIA;
2017

Abstract

In this paper, we unveil a disregarded benefit of product market competition for firms. We introduce the probability of bankruptcy in a simple model where firms compete à la Cournot and apply for collateralised bank loans to undertake productive investments. We show that the number of competitors and the existence of outsiders willing to acquire the productive assets of distressed incumbents affect the equilibrium share of investment financed by bank credit. Using a sample of Italian manufacturing firms, mostly small and medium-size enterprises (SMEs), we found evidence showing that the degree of product market competition is positively correlated with the share of investment financed by bank credit only when outsiders are absent
Articolo in rivista - Articolo scientifico
Product Market Competition; resale of productive assets; Collateralised bank loans
English
2017
49
2
295
318
reserved
Cerasi, V., Fedele, A., Miniaci, R. (2017). Product Market Competition and Access to Credit. SMALL BUSINESS ECONOMICS, 49(2), 295-318 [10.1007/s11187-017-9838-x].
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/10281/139872
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