Impact of Banking Competition on Lending Technologies
26 Pages Posted: 20 Jan 2015
Date Written: January 19, 2015
For the past 20 years, scholars have extensively discussed the impact of banking competition on the choice between transactional and relationship lending technologies, both empirically and theoretically, but have not yet come to a resolution. This study addresses this question using a new approach to relationship lending: a measure of the actual level of soft information banks use at the time of loan pricing. Using this new approach, the authors conclude that banks prefer to implement relationship lending technology when competition is weak. In addition, with regard to the shape of the relationship between competition and relationship banking, they find that, in accordance with extant theoretical conclusions, this relationship is nonlinear and concave.
Keywords: Banks, Lending Technologies, Banking competition, Small Business
JEL Classification: G21, L14
Suggested Citation: Suggested Citation