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.
|Place of Publication||Tilburg|
|Number of pages||42|
|Publication status||Published - 2006|
|Name||CentER Discussion Paper|
- bank orientation
- bank industry specialization
- lending relationships