Abstract
We examine how bank size affects borrowers, when information asymmetry is not particularly severe. Our sample comprises 20,806 loan facilities granted to 3,625 US public firms. After minimizing endogeneity concerns, we find that there is a positive relation between bank size and firm value, after the origination of the loan. Firms that borrow from large banks invest more, grow faster and have higher risk, proxied by earnings volatility. The effects are concentrated in borrowers which are ex-ante (pre-loan) safer (low leverage or high Z-Score) and muted, but not negative, in riskier firms. We highlight the bright side of large banks.
| Original language | English |
|---|---|
| Pages (from-to) | 170-185 |
| Number of pages | 16 |
| Journal | Journal of Corporate Finance |
| Volume | 46 |
| Early online date | 3 Jul 2017 |
| DOIs | |
| Publication status | Published - 1 Oct 2017 |
Structured keywords
- AF Banking
Keywords
- Firm Value
- Corporate Investment
- Scale Effects
- Too-big-to-fail Subsidy
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Dive into the research topics of 'Who needs big banks? The real effects of bank size on outcomes of large US borrowers'. Together they form a unique fingerprint.Profiles
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Dr Sonny Biswas
- School of Accounting and Finance - Business School - Associate Professor in Finance
Person: Academic
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Dr Fabiana A Gomez
- School of Accounting and Finance - Business School - Senior Lecturer in Finance
Person: Academic