This paper provides a financial intermediation approach to analyzing the real effects of bank market power. We start from the idea that banks, when operating in imperfectly competitive credit markets, can face a trade-off between exploiting their loan pricing power and enforcing hard corporate...

We study mechanisms by which the provision of incentives to new entrants is influenced by lenders' financial interests in incumbents. When a financier has a strong interest in protecting incumbent rents, he stifles the entrant's internal efficiency with a highly dilutive claim, and bribes her...

This paper develops a model of the interplay between corporate leverage and product differentiation strategy. Leverage improves managerial discipline, but it can also raise customer concerns about a vendor's long-term viability. We argue that customer concerns about firm viability will be...

We study a knowledge-based economy in which efficient production relies on entrepreneurs' managerial talent, and suppliers of complementary project inputs can expropriate entrepreneurs by appropriating their ideas and deploying them elsewhere. The threat of expropriation at early contract...

We analyze financial support for the entrepreneurial sector. State support can raise welfare by relaxing financial constraints, but it can also reduce lending standards if entrepreneurs substitute public sources of collateral for their own assets, if it encourages excessive entrepreneurial...

We develop a model to analyze the effects of credit protection (e.g., credit insurance, guarantees, credit default swaps) on the provision of incentives to borrowers. Credit protection insulates lenders against losses when liquidating non--performing borrowers' projects. This hardens borrowers'...

This paper analyzes the effects of a bank's equity stake in a competitor of a borrower on the financing relationship with the borrower and on product market outcomes. We show that depending on its size, the bank's equity stake in the competitor can give rise to anti-- or pro--competitive...

This article presents a model in which, contrary to conventional wisdom, competi- tion can make banks more reluctant to take excessive risks: As competition intensifies and margins decline, banks face more-binding threats of failure, to which they may respond by reducing their risk-taking. Yet,...

This discussion paper led to a publication in <A href="http://www.sciencedirect.com/science/article/pii/S1544612310000176"><I>Finance Research Letters</I></A>, 7(2), 127-34.<P>We argue that the recent corporate governance reform in the Netherlands provides a natural experiment to explore the impact of changes in corporate governance on financing policy. We find that, relative to a...</p></i></a>

We analyze financial support for the entrepreneurial sector. State support can raise welfare by relaxing financial constraints, but it can also reduce lending standards if entrepreneurs substitute public sources of collateral for their own assets, if it encourages excessive entrepreneurial...