Bank Competition and Enterprise Restructuring in Transition Economies

26 Pages Posted: 26 Jan 1999

See all articles by Monika Schnitzer

Monika Schnitzer

University of Munich - Department of Economics; Centre for Economic Policy Research (CEPR)

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Date Written: December 1998

Abstract

We investigate how bank competition affects the efficiency of credit allocation, using a model of spatial competition. Our analysis shows that bad loans are more likely the larger the number of banks competing for customers. We study further how many banks will be active if market entry is not regulated. Free entry can induce too much entry and thus too many bad loans compared to the social optimum. Finally, we analyse how bank competition affects the firms' restructuring effort. We find that restructuring has positive externalities that give rise to multiple equilibria, with either much or little restructuring activity.

JEL Classification: D43, G21, G34, L13, P31, P34

Suggested Citation

Schnitzer, Monika, Bank Competition and Enterprise Restructuring in Transition Economies (December 1998). Available at SSRN: https://ssrn.com/abstract=147468 or http://dx.doi.org/10.2139/ssrn.147468

Monika Schnitzer (Contact Author)

University of Munich - Department of Economics ( email )

Ludwigstrasse 28
Munich, D-80539
Germany
+49 89 2180 2217 (Phone)
+49 89 2180 2767 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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