The Impact of Competition on Bank Orientation

H.A. Degryse, S. Ongena

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How do banks react to increased competition?Recent banking theory offers conflicting predictions about the impact of competition on bank orientation - i.e., the choice of relationship based versus transactional banking.We empirically investigate the impact of interbank competition on bank branch orientation.We employ a unique data set containing detailed information on bank-firm relationships.We find that bank branches facing stiff local competition engage considerably more in relationship-based lending.Our results illustrate that competition and relationships are not necessarily inimical.
Original languageEnglish
Place of PublicationTilburg
Number of pages42
Publication statusPublished - 2006

Publication series

NameCentER Discussion Paper


  • bank orientation
  • bank industry specialization
  • competition
  • lending relationships


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