Clear and Close Competitors? On the Causes and Consequences of Bilateral Competition between Banks

Ralph de Haas, Liping Lu, S.R.G. Ongena

Research output: Working paperDiscussion paperOther research output

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Abstract

We interview 361 European bank CEOs to identify their banks’ main competitors. We then provide evidence on the drivers of bilateral bank competition, construct a novel competition measure at the locality level, and assess how well it explains variation in firms’ credit constraints. We find that banks identify another bank as a main competitor in small-business lending when their branch networks overlap, when both are foreign owned or relationship oriented, or when the potential competitor has fewer hierarchical layers. Intense bilateral bank competition increases local credit constraints, especially for small firms, as competition
may impede the formation of lending relationships.
Original languageEnglish
Place of PublicationTilburg
PublisherCentER, Center for Economic Research
Number of pages42
Volume2018-027
Publication statusPublished - 4 Sep 2018

Publication series

NameCentER Discussion Paper
Volume2018-027

Fingerprint

Competitors
Bank competition
Bilateral
Credit constraints
Main bank
Chief executive officer
European banks
Locality
Small firms
Lending relationships
Small business lending

Keywords

  • bilateral bank competition
  • multimarket contact
  • credit constraints

Cite this

de Haas, R., Lu, L., & Ongena, S. R. G. (2018). Clear and Close Competitors? On the Causes and Consequences of Bilateral Competition between Banks. (CentER Discussion Paper; Vol. 2018-027). Tilburg: CentER, Center for Economic Research.
de Haas, Ralph ; Lu, Liping ; Ongena, S.R.G. / Clear and Close Competitors? On the Causes and Consequences of Bilateral Competition between Banks. Tilburg : CentER, Center for Economic Research, 2018. (CentER Discussion Paper).
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de Haas, R, Lu, L & Ongena, SRG 2018 'Clear and Close Competitors? On the Causes and Consequences of Bilateral Competition between Banks' CentER Discussion Paper, vol. 2018-027, CentER, Center for Economic Research, Tilburg.

Clear and Close Competitors? On the Causes and Consequences of Bilateral Competition between Banks. / de Haas, Ralph; Lu, Liping; Ongena, S.R.G.

Tilburg : CentER, Center for Economic Research, 2018. (CentER Discussion Paper; Vol. 2018-027).

Research output: Working paperDiscussion paperOther research output

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de Haas R, Lu L, Ongena SRG. Clear and Close Competitors? On the Causes and Consequences of Bilateral Competition between Banks. Tilburg: CentER, Center for Economic Research. 2018 Sep 4. (CentER Discussion Paper).