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 language | English |
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| Place of Publication | Tilburg |
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| Publisher | Finance |
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| Number of pages | 42 |
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| Volume | 2006-68 |
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| Publication status | Published - 2006 |
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| Name | CentER Discussion Paper |
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| Volume | 2006-68 |
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- bank orientation
- bank industry specialization
- competition
- lending relationships