Lending Competition and Relationship Banking: Evidence from Japanese Prefectural Level Data
13 Pages Posted: 19 Oct 2009
Date Written: October 14, 2009
The question of whether more competition among banks increases relationship banking, which is predicted to improve credit availability for informationally opaque firms in theory, is a controversial issue in the banking literature. By using firm-level survey data in Japan, this paper provides evidence for the negative correlation between lending competition and the provision of relationship banking. This paper raises the question whether fierce interbank competition is always beneficial for small firms.
Keywords: relationship banking, lending competition
JEL Classification: G21, L11, L14, D82
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