TY  - JOUR
AU  - Fisman,Raymond
AU  - Raturi,Mayank
TI  - Does Competition Encourage Credit Provision? Evidence from African Trade Credit Relationships
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 9659
PY  - 2003
Y2  - April 2003
UR  - http://www.nber.org/papers/w9659
L1  - http://www.nber.org/papers/w9659.pdf
N1  - Author contact info:
Raymond Fisman
School of Business
Columbia University
622 Uris Hall
3022 Broadway
New York, NY 10027
Tel: 212/854-9157
Fax: 212-316-9219
E-Mail: rf250@columbia.edu
AB  - Previous work has claimed that monopoly power facilitates the provision of credit, since monopolists are better able to enforce payment. Here, we argue that if relationship-specific investments are required by borrowers to establish creditworthiness, monopoly power may reduce credit provision because hold up problems ex post will deter borrowers from investing in establishing creditworthiness. Empirically, we examine the relationship between monopoly power and credit provision, using data on the supply relationships of firms in five African countries. Consistent with the upfront investment story, we find that monopoly power is negatively associated with credit provision, and that this correlation is stronger in older supplier relationships. Because the data include several observations per firm, we are able to utilize firm fixed-effects, thus netting out unobserved firm characteristics that may have been driving results in earlier studies.
ER  -