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Bank Market Structure and Firm Capital Structure

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  • Lieven Baert
  • Rudi Vander Vennet

Abstract

We explore the impact of concentration in the banking markets on the capital structure of publicly quoted non-financial firms in the EU15 over the period 1997- 2005, an era marked by intensive merger activity in the banking sector. Our main finding is a negative and significant relationship between the degree of concentration of European bank markets and the market leverage of firms, indicating the persistence of credit constraints. This finding is robust when we use behavioral measures of bank conduct. This support for the market power hypothesis indicates that further measures are needed to make bank lending more competitive.

Suggested Citation

  • Lieven Baert & Rudi Vander Vennet, 2008. "Bank Market Structure and Firm Capital Structure," Working Paper / FINESS 2.1, DIW Berlin, German Institute for Economic Research.
    • Handle: RePEc:diw:diwfin:diwfin2.1
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    File URL: https://www.diw.de/documents/publikationen/73/diw_01.c.96128.de/diw_finess_02010.pdf
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    References listed on IDEAS

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    Cited by:

    1. Rabah Amir & Michael Troege, 2011. "On the effects of banks’ equity ownership on credit markets," Annals of Finance, Springer, vol. 7(1), pages 31-52, February.

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    More about this item

    Keywords

    Bank concentration; Capital structure;

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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