Abstract
Although research shows that competitive banks spur corporate growth, less is known about the impact of bank competition on corporate risk. Using a sample of more than 70,000 firm-year observations covering the period from 1975 through 1994, we find that deregulation that intensified competition among banks materially reduced corporate risk, especially among firms that rely heavily on bank finance. We find that competition-enhancing bank deregulation reduced corporate volatility by easing credit constraints when firms experience adverse shocks and reducing the procyclicality of borrowing.
| Original language | English |
|---|---|
| Article number | 101520 |
| Journal | Journal of Corporate Finance |
| Volume | 60 |
| Early online date | 8 Nov 2019 |
| DOIs | |
| Publication status | Published - Feb 2020 |
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Keywords
- Banks
- Financial risk
- Regulation
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Bank deregulation and corporate risk. / JIANG, Tianjiao; LEVINE, Ross; LIN, Chen ; WEI, Lai.
In: Journal of Corporate Finance, Vol. 60, 101520, 02.2020.Research output: Journal Publications › Journal Article (refereed)
TY - JOUR
T1 - Bank deregulation and corporate risk
AU - JIANG, Tianjiao
AU - LEVINE, Ross
AU - LIN, Chen
AU - WEI, Lai
PY - 2020/2
Y1 - 2020/2
N2 - Although research shows that competitive banks spur corporate growth, less is known about the impact of bank competition on corporate risk. Using a sample of more than 70,000 firm-year observations covering the period from 1975 through 1994, we find that deregulation that intensified competition among banks materially reduced corporate risk, especially among firms that rely heavily on bank finance. We find that competition-enhancing bank deregulation reduced corporate volatility by easing credit constraints when firms experience adverse shocks and reducing the procyclicality of borrowing.
AB - Although research shows that competitive banks spur corporate growth, less is known about the impact of bank competition on corporate risk. Using a sample of more than 70,000 firm-year observations covering the period from 1975 through 1994, we find that deregulation that intensified competition among banks materially reduced corporate risk, especially among firms that rely heavily on bank finance. We find that competition-enhancing bank deregulation reduced corporate volatility by easing credit constraints when firms experience adverse shocks and reducing the procyclicality of borrowing.
KW - Banks
KW - Financial risk
KW - Regulation
UR - http://www.scopus.com/inward/record.url?scp=85074665881&partnerID=8YFLogxK
U2 - 10.1016/j.jcorpfin.2019.101520
DO - 10.1016/j.jcorpfin.2019.101520
M3 - Journal Article (refereed)
VL - 60
JO - Journal of Corporate Finance
JF - Journal of Corporate Finance
SN - 0929-1199
M1 - 101520
ER -