وام های صنعتی و ساختار بازار
|کد مقاله||سال انتشار||تعداد صفحات مقاله انگلیسی||ترجمه فارسی|
|19679||2003||15 صفحه PDF||سفارش دهید|
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Publisher : Elsevier - Science Direct (الزویر - ساینس دایرکت)
Journal : European Economic Review, Volume 47, Issue 5, October 2003, Pages 841–855
Based on the observation that financing is one of the main obstacles to create new firms, this paper deals with the interactions between the market structure of both the banking sector and the borrowing industries. We consider that firms’ installation costs are financed by means of industrial loans from specialized banks. With endogenous entry in banking activity as well as in the borrowing industry, we find that a natural oligopoly emerges in both sectors if the entry cost in the industrial sector is small enough, relative to the banks’ entry cost.
It is usually claimed that financing is one of the main obstacles in the creation of new firms. In line with that observation, this paper studies the impact of industrial loans from banks on the market structure of both the banking sector and the borrowing industries. Specifically, our main aim is to deal with the limit configuration that emerges in both markets when the conventional conditions for perfect competition tend to prevail, that is, when the entry costs in both sectors converge to zero. In that context, our results suggest that a natural oligopoly may arise as the emerging limit configuration in both sectors. In developing a model of industrial loans and market structure, we consider that the entrepreneurs borrow from specialized banks in order to build up their firms, and then the resulting active entities compete on the product market. This means that the entrepreneurs compete both to obtain loans from banks and to sell the output to consumers. As a consequence, in deciding on the amount of loans there are two opposite effects on any bank's payoff. First, there is a positive market-share effect according to which the bank is able to capture a larger market share by means of extra loans to entrepreneurs, hence providing the bank with a private incentive to perform aggressively in the loan market. Second, there is a negative rent-extraction effect because those extra loans imply more competition on the product market, which reduces each bank's ability to extract rents from its borrowing firms, and induces the banks to perform less aggressively in the loan market in order to ensure less competition among firms. In a preliminary version of the model, we examine the case in which the number of banks is exogenous. This allows us to explore how a given configuration for the banking sector affects the equilibrium structure in the borrowing industry. We find that if the number of banks is small enough, relative to the degree of product differentiation, the rent-extraction effect dominates and the equilibrium structure in the product market mimics the configuration of the banking sector. By contrast, if the number of banks is high enough, relative to the degree of product differentiation, the market-share effect dominates and the subgame perfect Nash equilibrium (SPNE) leads to a number of loans that goes to infinity as the entry cost per firm tends to zero. On the grounds of the baseline version of the model, we consider afterwards the number of specialized banks as endogenous. In particular, we assume that every bank must pay a fixed cost in order to enter the market of loans to a particular industry. In this part of the paper, we show that if the conventional conditions for the emergence of perfect competition tend to prevail, then the SPNE will in fact tend to one of the following outcomes: Perfect competition in both markets, natural oligopoly in the loan market with perfect competition in the product market, or a natural oligopoly in both markets, all of which depend on the relationship between the rate of convergence of both fixed costs to zero and on the degree of product differentiation. That is, the equilibrium market structure will depend on the relative rate at which the conventional conditions for perfect competition in both markets tend to emerge. Remarkably, when the two entry costs tend to zero but creating a bank is still relatively more costly than creating a firm (the fixed cost by firms converges to zero at a higher rate), then the SPNE converges to a natural oligopoly in both markets. The reason for this is that the market-share and rent-extraction effects create a discontinuity in the incentive to provide loans, so that the former effect dominates when the number of banks is beyond a given critical level. In consequence, the threat of triggering a large number of loans (associated to negative profits) if “excessive” entry occurs, can ensure that in fact a small number of banks enter and provide an amount of loans also small in number. The current paper is closely related to the literature on the implications of finance on product market competition. This literature suggests that credit market competition affects lending relationships, so that the banking sector emerges as a key determinant in shaping the borrowing industries.1 The current paper builds on this literature and explores the equilibrium configurations that tend to emerge in the banking sector and the borrowing industries. Our findings reveal the existence of a strategic linkage between banks and borrowing firms which is due to the presence of industrial loans. These loans rely on bank–firm relationships which can be also present under other forms of financing such as equity stakes. In fact, a number of recent papers deal with the anticompetitive effects of equity stakes. Specifically, Cestone and White (1999) argue that a monopolistic investor may finance a firm with equity in order to commit not to finance a potential competitor, thus preventing entry from the rival; and Arping (2001) allows the potential rival to raise funds from an outsider in order to analyze the antitrust implications of bank commerce affiliations. As in González-Maestre and Granero (1997), these two papers contain an effect according to which banks recognize that by lending to an additional firm may affect product market competition, and hence the profitability of previous loans. In contrast to both of these papers, ours makes it endogenous the structure in both the banking and the borrowing sectors, thereby leading to a novel spillover effect according to which competition between financiers interacts with product market competition. A different strand of the literature shows that natural oligopolies can arise due to the presence of various revenue or production cost conditions. First, authors such as Gabszewicz and Thisse (1980), and Shaked and Sutton (1983) show that natural oligopolies can arise in equilibrium under quality (that is, vertical) product differentiation. Among other differences with these authors’ setting, the only source of product differentiation in our model is purely horizontal in nature. Hence, we do not deal with a rationale based on revenue conditions mainly driven by the structure of product demand. Second, Sutton (1991, Chapter 3) and Vives (1999, Section 4.3.2) offer a rationale in which natural oligopolies can be generated under concave production costs, as then an increase of the market size does not necessarily cause a fall in concentration. However, a crucial assumption in Sutton's setting is that the firms’ sunk costs are endogenous, while in our model the natural oligopoly is obtained under exogenous sunk costs.2 Therefore, in contrast to the previous literature on natural oligopolies, which rests on cost or demand conditions, our results rely on the interaction between banks and firms. The remainder of the paper is organized as follows. In the next section we examine the benchmark model with a given number of banks. Then, in Section 3 we deal with the model under endogenous entry in the banking sector. Finally, Section 4 closes the paper and gathers our main conclusions.
نتیجه گیری انگلیسی
The results of this paper show that some aspects of the banking activity can have relevant implications for the market structure of the borrowing industries. As a first step, in a benchmark with an exogenous number of banks, we investigate the relationship between the number of banks and the equilibrium in both the market for loans and the product market. In that setting, our analysis has a number of policy implications. For example, it is apparent that mergers among banks can affect the structure of the banking industry, but we can also analyze the way in which such mergers can affect the configuration of those sectors financed through industrial loans from banks. In particular, our results suggest that even a relatively small decrease in the number of banks can cause an important fall in the degree of competition among the borrowing firms and in overall welfare. Under endogenous entry in the market for specialized industrial loans, we show that those loans create a strategic link between the banking sector and the industries that borrow from banks. In that context, our results suggest that natural oligopoly might arise not only in the banking activity but also in the product market. This leads to an alternative explanation to the persistence of anticompetitive market structures in some of the sectors involved in the financing of entrant firms. While models explaining natural oligopolies that rely on vertical product differentiation or concave production cost exist, our argument rests on the presence of upstream financial entities. This suggests that our approach can be extended beyond the limits of banking and industrial loans to deal with both the upstream and downstream market structures in vertical relationships.