Abstract

  


 



Does Competition Make Loan Markets More Fragile?


Erkki Koskela


University of Helsinki - Department of Political and Economic Studies; CESifo (Center for Economic Studies and Ifo Institute for Economic Research); Bank of Finland - Research Department; Institute for the Study of Labor (IZA)

Rune Stenbacka


Swedish School of Economics and Business Administration
November 1995

Center for Economic Studies Working Paper at University of Munich, Number 92

Abstract:     
We model the interaction between the concentration of the banking sector and the investment strategies of imperfectly competitive firms in the product market to address the question of whether competition makes loan markets more fragile. It is shown how a merger between two banks would typically decrease the interest rate and increase the investment volume of imperfectly competitive firms in the product market. Under quite plausible conditions this implies that a merger will increase the stability of loan markets in the sense of decreasing bankruptcy risks.

Keywords: Bank Competition, Bankruptcy Risk, Mergers, Credit Market Stability.

JEL Classification: G21, G33, G34

working papers series


Date posted: July 9, 1998  

Suggested Citation

Koskela, Erkki and Stenbacka, Rune, Does Competition Make Loan Markets More Fragile? (November 1995 ). Center for Economic Studies Working Paper at University of Munich, Number 92. Available at SSRN: http://ssrn.com/abstract=7178

Contact Information

Erkki Koskela (Contact Author)
University of Helsinki - Department of Political and Economic Studies ( email )
P.O. Box 54
FIN-00014 Helsinki
Finland
+358 9 191 8894 (Phone)
+358 9 191 8877 (Fax)
HOME PAGE: http://www.cesifo.de/servlet/page?_pageid=56&_dad=portal30&_schema=PORTAL30&pa_id=7298
CESifo (Center for Economic Studies and Ifo Institute for Economic Research)
Poschinger Str. 5
Munich, DE-81679
Germany
HOME PAGE: http://www.CESifo.de
Bank of Finland - Research Department ( email )
P.O. Box 160
FIN-00101 Helsinki
Finland
Institute for the Study of Labor (IZA)
P.O. Box 7240
Bonn, D-53072
Germany
Rune Stenbacka
Swedish School of Economics and Business Administration ( email )
P.O. Box 479
FI-00101 Helsinki
Finland
+35 89 4313 3433 (Phone)
+35 89 4313 3382 (Fax)
Feedback to SSRN (Beta)


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