Many countries prohibit large shareholdings in their domestic banks.The authors examine whether such a restriction restrains competition in a duopolistic loan market. Blockholders may influence managers' output decisions by choosing capital structure, as in Brander and Lewis (1986).
Burkart and Ellingsen's (2004) model of trade credit and bank credit rationing predicts that trade credit will be used by medium-wealth and low-wealth firms to help ease bank credit rationing.