Working Paper: NBER ID: w20310
Authors: Justin Murfin; Mitchell Petersen
Abstract: The market for corporate credit is characterized by significant seasonal variation, both in interest rates and the volume of new lending. Firms borrowing from banks during seasonal "sales" in late spring and fall issue at 19 basis points cheaper than winter and summer borrowers. Issuers during cheap seasons appear to have less immediate or uncertain needs, but are enticed by low rates to engage in precautionary borrowing. High interest rate periods capture borrowers with unanticipated, non-deferrable investment needs. Consistent with models of intertemporal price discrimination, seasonality is strongly associated with market concentration among a few large banks with repeated interactions.
Keywords: credit market; seasonality; borrower need; lender rents
JEL Codes: G21; G32; L1
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| seasonal variations in interest rates (E43) | borrower behavior (G51) |
| firms borrowing during low-priced periods (G32) | lower interest rates (E43) |
| higher credit quality firms (G32) | time borrowing to take advantage of cheaper rates (E43) |
| weaker firms (L19) | issue loans during expensive months (G21) |
| persistence of seasonal pricing (D40) | lender behavior (G21) |
| lenders maintaining seasonal markups (G21) | lack of competition (D41) |
| borrower urgency and lender market power (G21) | seasonal dynamics of the corporate credit market (E44) |