Product Market Competition and Collateralized Debt

30 Pages Posted: 2 Jul 2012 Last revised: 8 Jun 2013

See all articles by Vittoria Cerasi

Vittoria Cerasi

Università degli Studi di Milano-Bicocca - Department of Economics, Management and Statistics (DEMS)

Alessandro Fedele

Free University of Bozen-Bolzano - Faculty of Economics and Management

Raffaele Miniaci

University of Brescia - Department of Economics and Management

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Date Written: February 15, 2013

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 benefit 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

JEL Classification: D22, L13, G33

Suggested Citation

Cerasi, Vittoria and Fedele, Alessandro and Miniaci, Raffaele, Product Market Competition and Collateralized Debt (February 15, 2013). Available at SSRN: https://ssrn.com/abstract=2097884 or http://dx.doi.org/10.2139/ssrn.2097884

Vittoria Cerasi (Contact Author)

Università degli Studi di Milano-Bicocca - Department of Economics, Management and Statistics (DEMS) ( email )

Piazza dell'Ateneo Nuovo, 1
Milan, 20126
Italy
+39-02-64485821 (Phone)
+39-02-64485878 (Fax)

Alessandro Fedele

Free University of Bozen-Bolzano - Faculty of Economics and Management ( email )

Via Sernesi 1
39100 Bozen-Bolzano (BZ), Bozen 39100
Italy

Raffaele Miniaci

University of Brescia - Department of Economics and Management ( email )

Via San Faustino 74B
Brescia, 25122
Italy

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