The Impact of Competition on Bank Orientation and Specialization

H.A. Degryse, S. Ongena

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Abstract

How do banks react to increased interbank competition?Recent banking theory offers conflicting predictions about the impact of competition on bank orientation í L H WKH choice of relationship based versus transactional banking í DQG EDQN LQGXVWU\ specialization.We empirically investigate the impact of interbank competition on bank branch orientation and specialization.We employ a unique data set containing detailed information on bank-firm relationships and industry classification.We find that bank branches facing stiff local competition engage relatively more in relationship-based lending but specialize somewhat less in a particular industry.Our results illustrate that competition and relationships are not necessarily inimical.
Original languageEnglish
Place of PublicationTilburg
PublisherFinance
Number of pages59
Volume2003-108
Publication statusPublished - 2003

Publication series

NameCentER Discussion Paper
Volume2003-108

Keywords

  • competition
  • banks
  • bank lending

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    Degryse, H. A., & Ongena, S. (2003). The Impact of Competition on Bank Orientation and Specialization. (CentER Discussion Paper; Vol. 2003-108). Finance.