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Interbank market integration, loan rates, and firm leverage

Popov,A.
; 
Ongena,S.
Abstract
This paper investigates the effect of interbank market integration on small firm finance in the build-up to the 2007–2008 financial crisis. We use a comprehensive data set that contains contract terms on individual loans to 6047 firms across 14 European countries between 1998:01 and 2005:12. We account for the selection that arises in the loan request and approval process. Our findings imply that integration of interbank markets resulted in less stringent borrowing constraints and in substantially lower loan rates. The decrease was strongest in markets with competitive banking sectors. We also find that in the most rapidly integrating markets, firms became substantially overleveraged during the build-up to the crisis.
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Date
2011
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Tilburg University Research Output Collection
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Keywords
SDG 9 - Industry, Innovation, and Infrastructure, SDG 10 - Reduced Inequalities
Citation
Popov, A & Ongena, S 2011, 'Interbank market integration, loan rates, and firm leverage', Journal of Banking & Finance, vol. 35, no. 3, pp. 544-559. https://doi.org/10.1016/j.jbankfin.2010.08.011
URI
https://hdl.handle.net/20.500.14602/56125
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