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Licensed Unlicensed Requires Authentication Published by De Gruyter July 15, 2011

Does Product Market Competition Increase Credit Availability?

Vittoria Cerasi and Alessandro Fedele

Abstract

With asymmetric information between investors and firms, credit availability is affected by the resale value of collateralized productive assets. If liquidation occurs, investors recover a greater value the higher the probability to find a buyer and the higher his willingness to pay to use the assets for production. We extend the idea of complementarities among firms in the same industry (as in Shleifer and Vishny, 1992) to study under which conditions credit availability is enhanced by competition in the product market when assets are industry specific.

Published Online: 2011-7-15

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