TY  - JOUR
AU  - Petersen,Mitchell A.
AU  - Rajan,Raghuram G.
TI  - The Effect of Credit Market Competition on Lending Relationships
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 4921
PY  - 1994
Y2  - November 1994
UR  - http://www.nber.org/papers/w4921
L1  - http://www.nber.org/papers/w4921.pdf
N1  - Author contact info:
Mitchell A. Petersen
Kellogg School of Management
Northwestern University
2001 Sheridan Road
Evanston, IL  60208
Tel: 847/467-1281
Fax: 847/491-5719
E-Mail: mpetersen@northwestern.edu

Raghuram Rajan
Booth School of Business
University of Chicago
5807 South Woodlawn Avenue
Chicago, IL 60637
Tel: 773/702-4437
Fax: 773/702-0458
E-Mail: raghuram.rajan@ChicagoBooth.edu
AB  - This paper provides a simple model showing that the extent of competition in credit markets is important in determining the value of lending relationships.  Creditors are more likely to finance credit constrained firms when credit markets are concentrated because it is easier for these creditors to internalize the benefits of assisting the firms.  The model has implications about the availability and the price of credit as firms age in different markets.  The paper offers evidence for these implications from small business data.  It concludes with conjectures on the costs and benefits of liberalizing financial markets, as well as the timing of such reforms.
ER  -