The Impact of Organizational Structure and Lending Technology on Banking Competition
KU Leuven, Department Accounting, Finance and Insurance; Centre for Economic Policy Research (CEPR)
European Central Bank (ECB); Centre for Economic Policy Research (CEPR)
University of Zurich - Department of Banking and Finance; Swiss Finance Institute
Review of Finance, Vol. 13, Issue 2, pp. 225-259, 2009
We investigate how bank organization shapes banking competition. We show that a bank's geographical lending reach and loan pricing strategy is determined by its own and its rivals’ organizational structure. We estimate the impact of organization on the geographical reach and loan pricing of a large bank. We find that the reach of the bank is smaller when rival banks are large and hierarchically organized, have superior communication technology, have a narrower span of organization, and are closer to a decision unit with lending authority. Rival banks’ size and the number of layers to a decision unit soften spatial pricing.
Keywords: G21, L11, L14
Date posted: April 21, 2009