The Impact of Competition on Bank Orientation and Specialization

59 Pages Posted: 30 Jun 2004

See all articles by Hans Degryse

Hans Degryse

KU Leuven, Department Accounting, Finance and Insurance; Centre for Economic Policy Research (CEPR)

Steven Ongena

University of Zurich - Department of Banking and Finance; Swiss Finance Institute; KU Leuven; Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 3 versions of this paper

Date Written: November 8, 2003

Abstract

How do banks react to increased interbank competition? Recent banking theory offers conflicting predictions about the impact of competition on bank orientation - i.e., the choice of relationship based versus transactional banking - and bank industry specialization. We empirically investigate the impact of interbank competition on bank branch orientation and specialization. We employ a unique data set containing detailed information on bank-firm relationships and industry classification. We find that bank branches facing stiff local competition engage relatively more in relationship-based lending but specialize somewhat less in a particular industry. Our results illustrate that competition and relationships are not necessarily inimical.

Keywords: bank orientation, bank industry specialization, competition, lending relationships

JEL Classification: G21, L11, L14

Suggested Citation

Degryse, Hans and Ongena, Steven R. G., The Impact of Competition on Bank Orientation and Specialization (November 8, 2003). EFA 2004 Maastricht Meetings Paper No. 1517. Available at SSRN: https://ssrn.com/abstract=559023 or http://dx.doi.org/10.2139/ssrn.559023

Hans Degryse

KU Leuven, Department Accounting, Finance and Insurance ( email )

Naamsestraat 69
Leuven, B-3000
Belgium

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Steven R. G. Ongena (Contact Author)

University of Zurich - Department of Banking and Finance ( email )

Schönberggasse 1
Zürich, 8001
Switzerland

Swiss Finance Institute

c/o University of Geneva
40, Bd du Pont-d'Arve
CH-1211 Geneva 4
Switzerland

KU Leuven ( email )

Oude Markt 13
Leuven, Vlaams-Brabant 3000
Belgium

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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