Enterprise Restructuring and Bank Competition in Transition Economies

Posted: 13 Apr 1999

See all articles by Monika Schnitzer

Monika Schnitzer

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

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 restructuring efforts of firms. We find that restructuring has positive externalities which give rise to multiple equilibria, with either much or little restructuring activity.

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

Suggested Citation

Schnitzer, Monika, Enterprise Restructuring and Bank Competition in Transition Economies. Economics of Transition, Vol. 7, Issue 1, March 1999. Available at SSRN: https://ssrn.com/abstract=158090

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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