Date of Award

2020

Degree Type

Dissertation

Degree Name

Doctor of Philosophy (PhD)

Graduate Group

Economics

First Advisor

Guillermo L. Ordonez

Second Advisor

Michael R. Roberts

Abstract

This thesis focuses on two themes in the field of empirical corporate finance and

banking. First, the importance of credit market structure for price and non-price

conditions of credit (first and second chapter); second, the importance of financing

frictions for the allocation of control rights over firms (third chapter).

The first chapter investigates the role of competition between lenders in determining

how changes in capital requirements passthrough to the cost of credit for firms.

Exploiting a drop in capital requirements through a Regression Discontinuity Design

and detailed data on credit relationships from the Bank of Italy’s Credit Register, I

show that firms with lower switching costs between credit providers experienced a

much larger drop in the cost of credit as a result of the drop in capital requirements.

The second chapter focuses on the importance of bank specialization in monitoring

specific projects for the allocation of control (covenants) and cash flow (cost of credit)

rights in syndicated lending. Using detailed information on credit relationships in

the syndicated loan market, I document that banks specialize in lending to specific

industries and that this specialization is persistent over time. Then, I show evidence

that specialized banks retain less control rights (laxer covenants) when they arrange

loans for firms within their specialization sector. Such evidence is coherent with

information advantage explanations of bank specialization.

The third chapter studies how credit market frictions affecting younger managers

can explain the prevalence of senior managers in Italy. Using country-level and firmlevel

survey data, I document the prevalence of over-65 year old CEO and entrepreneurs

in Italy; using firm-level data, I show that only in Italy it is the case that firms led

by younger people are more likely to be denied credit. I then draft a simple general

equilibrium model of allocation of control rights over firms to study in which cases

such friction leads to misallocation of control.

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