Bank information and firm growth. Microeconomic evidence from the US credit market

We examine the effect of bank information on the growth of borrowing firms by using matched bank-firm data from the US credit market. Exploiting the structure of lending syndicates to construct proxies for banks’ information acquisition, we find consistent evidence that bank monitoring spurs firms’ investments in tangible and intangible assets, promoting higher growth. Conversely, little evidence exists of banks exploiting informational monopolies that could deter firm investments, even when banks hold significant credit market power. Banks’ information does not appear to bias firm growth toward capital-intensive investments, but does also foster employment growth.