The Impact of Competition on Bank Orientation

H.A. Degryse, S. Ongena

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Abstract

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
PublisherFinance
Number of pages42
Volume2006-68
Publication statusPublished - 2006

Publication series

NameCentER Discussion Paper
Volume2006-68

Keywords

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

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    Degryse, H. A., & Ongena, S. (2006). The Impact of Competition on Bank Orientation. (CentER Discussion Paper; Vol. 2006-68). Finance.