Is the EIB distorting competiton? Evidence from Portugal

Abstract

The European Investment Bank nances projects of medium and large sized rms through "project loans". Because they involve favorable conditions such as low interest rates and a long repayment period, there is a question of whether the EIB could be distorting market competition and reinforcing eventual dominant positions. This paper aims to empirically test this hypothesis. Using data from Portuguese rms between 2007 and 2015, we use an empirically robust estimator to assess the impact of project loans on rms' market shares, which proxies market power. As a byproduct of this research, we also investigate the impact on rms' investment rate. We nd no evidence that assisted rms experience abnormal increases in their market shares in the years that follow the attribution of the loans. Thus, we fail to reject the hypothesis that project loans do not distort market competition.