This paper shows how main bank rent extraction affects corporate decisions about investment and financing during financial regulatory reform. Our model predicts that limited loanable funds can initially contain main bank controlled overinvestment, even when new equity is available to the firm....

We find that growth type (identified by a two-way sort on firm initial market-to-book ratio and asset tangibility) can parsimoniously predict significantly dispersed and persistently distinct future leverage ratios. Growth type is persistent; growth-type-sorted cross-sections of corporate...

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...