The Impact of Competition on Bank Orientation

CentER Discussion Paper Series No. 2006-68

41 Pages Posted: 17 Sep 2006

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)

Date Written: February 2006

Abstract

How do banks react to increased 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. We empirically investigate the impact of interbank competition on bank branch orientation. We employ a unique data set containing detailed information on bank-firm relationships. We find that bank branches facing stiff local competition engage considerably more in relationship-based lending. 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 (February 2006). CentER Discussion Paper Series No. 2006-68. Available at SSRN: https://ssrn.com/abstract=930372 or http://dx.doi.org/10.2139/ssrn.930372

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 )

Sch├Ânberggasse 1
Z├╝rich, 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

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
176
Abstract Views
1,065
rank
177,172
PlumX Metrics