Agency cost of debt and lending market competition : Is there a relationship?

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Title: Agency cost of debt and lending market competition : Is there a relationship?
Author: Koskela, Erkki ; Stenbacka, Rune
Organization: Suomen Pankki
Series: Suomen Pankin keskustelualoitteita
Series number: 12/2000
Year of publication: 2000
Publication date: 2.10.2000
Pages: 20 s.
Keywords: luotonanto; kilpailu; pankkitoiminta; luotot; kustannukset; rahoitus;
Abstract: We address the question of how lending market competition, measured by the bargaining power of banks, affects the agency costs of debt finance.It is shown that intensified lending market competition will lead to lower lending rates and investment return distributions which are shifted towards lower, but less risky returns.Consequently, it follows that increased lending market competition will reduce the agency cost of debt financing.Hence, our analysis does not lend support to the commonly held view that there would be a trade-off between more intensive lending market competition and higher agency costs of debt finance.
Rights: https://helda.helsinki.fi/bof/copyright


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