| In the first essay we test the incentive-based theories of capital structure predicting that leverage has a positive effect on firm performance as Jensen (1986) and Jensen and Meckling (1976). We investigate the empirical relationship between capital structure and profit efficiency with a simultaneous equations model, controlling for corporate governance factors and employing a sample US banks. Profit efficiency measures relative performance in terms of the deviation of a firm's profits from the best-practice in the industry, given the exogenous conditions faced by that firm. The second essay tests the empirical relevance of theories of banking arguing that competition may have a negative effect on the availability of credit to informationally opaque firms. We study the empirical relationship between competition in the financial sector and the creation of firms in the non-financial sector. Our evidence suggests that competition in banking is more detrimental (or less favorable) to the emergence of new firms in industrial sector where asymmetric information is more important. The third essay investigates the effects of consolidation in the banking industry on small business lending. We estimate the total effect of consolidation on credit and non-performing loans on a panel of Italian local markets. Then, we analyze the effects of consolidation on credit to a large sample of non-financial firms, controlling for firm and market characteristics. Our results suggest that consolidation is followed by a reassessment of the portfolio and that borrowers in good standing are not affected by mergers. |
