We show that bank competition diminishes banks’ incentives to produce information about prospective borrowers. We exploit the deregulation of US interstate branching as a shock to competition and use borrowers’ stock returns after loan announcements to measure bank information production. Positive loan announcement returns are reduced in states that deregulate interstate branching, especially for opaque and bank-dependent firms and smaller banks that rely on soft information. Existing (inside) banks reduce information production more than new (outside) banks after deregulation, suggesting that they do so to deter borrower poaching. Furthermore, the probability of a covenant violation increases following deregulation.

Bank competition and information production

De Marco, Filippo
;
Petriconi, Silvio
2024

Abstract

We show that bank competition diminishes banks’ incentives to produce information about prospective borrowers. We exploit the deregulation of US interstate branching as a shock to competition and use borrowers’ stock returns after loan announcements to measure bank information production. Positive loan announcement returns are reduced in states that deregulate interstate branching, especially for opaque and bank-dependent firms and smaller banks that rely on soft information. Existing (inside) banks reduce information production more than new (outside) banks after deregulation, suggesting that they do so to deter borrower poaching. Furthermore, the probability of a covenant violation increases following deregulation.
File in questo prodotto:
File Dimensione Formato  
loancompetition_fullMS.pdf

non disponibili

Descrizione: manuscript
Tipologia: Documento in Pre-print (Pre-print document)
Licenza: NON PUBBLICO - Accesso privato/ristretto
Dimensione 824.3 kB
Formato Adobe PDF
824.3 kB Adobe PDF   Visualizza/Apri
email_accept_JFQA.pdf

non disponibili

Descrizione: lettera accettazione
Tipologia: Allegato per valutazione Bocconi (Attachment for Bocconi evaluation)
Licenza: NON PUBBLICO - Accesso privato/ristretto
Dimensione 544.05 kB
Formato Adobe PDF
544.05 kB Adobe PDF   Visualizza/Apri
bank-competition-and-information-production.pdf

accesso aperto

Descrizione: article
Tipologia: Pdf editoriale (Publisher's layout)
Licenza: Creative commons
Dimensione 469.88 kB
Formato Adobe PDF
469.88 kB Adobe PDF Visualizza/Apri

I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.

Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11565/4058797
Citazioni
  • ???jsp.display-item.citation.pmc??? ND
  • Scopus 0
  • ???jsp.display-item.citation.isi??? 0
social impact