Previous research shows that bank information production mitigates asymmetric information problems. However, this literature has ignored the concern that firms with better growth prospects are more vulnerable to bank rent extraction. This paper points out that funding competition from new equity...

We propose a U-shaped relation between the relative weight of bank loans in total corporate debt and the firm's market-to-book ratio-a proxy for expected growth-which reconciles most existing theories. Using data on Japanese firms for 1983-97, we do find that, in the lower range of growth...

Previous research shows that bank information production mitigates asymmetric information problems. However, this literature has ignored the concern that firms with better growth prospects are more vulnerable to bank rent extraction. This paper points out that funding competition from new equity...