Bank Market Power and Firm Performance*

Abstract

Does market power of banks affect firm performance? To answer this question we examine 25,236 syndicated loan facilities granted between 2000 and 2010 by 296 banks to 9,029 US non-financial firms. Accounting for both observed and unobserved bank and firm heterogeneity, we find that firms that were recently poorly performing obtain loans from banks with more market power. However, in the year after loan origination market power positively affects firm performance, but only if it is not too high. Our estimates thus suggest that bank market power can facilitate access to credit by poorly-performing firms, yet at the same time also boosts the performance of the firms that obtain credit.

Enforcement actions on banks and the structure of loan syndicates

“…Although this evidence is consistent with a reputation story, it is also consistent with alternative explanations based on matching between better quality borrowers and large lead arrangers, and the exercise of bank market power (Delis et al, 2017a). Unlike these papers, we do not assume the effectiveness of the reputation mechanism, but instead explore variation in it in the cross-section and over time.…”

Intellectual capital and bank profitability: Evidence from conventional and Islamic bank in Indonesia

“…In addition, Malaysia Islamic banking is bigger than in Indonesia Islamic banking. Having superior lending capacity may help the organization to accumulate more experiences and better able to invest their fund (Delis, Kokas, & Ongena, 2017) Our analysis may have important implications for managers. Our study can be a critique for Indonesia banking industry, especially Islamic banks.…”

Does Institutional Ownership and Bank Monitoring Affect Agency Conflicts? Evidence from an Emerging Market

“…Total institutional ownership, government ownership, and private ownership mitigate agency conflicts measured by the AUR ratio, showing that firms with higher institutional ownership have a better AUR ratio. Institutional shareholders use their privilege to be able to supervise the firms better (Shleifer &Vishny, 1986;Demsetz, 1983in Agrawal &Mandelker, 1990Bathala et al, 1994;Ang et al, 2000;Gillan& Starks, 2000;Noe, 2002;Delis et al, 2017).…”