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The impact of competition on bank orientation

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  • Degryse, Hans
  • Ongena, Steven

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.

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Article provided by Elsevier in its journal Journal of Financial Intermediation.

Volume (Year): 16 (2007)
Issue (Month): 3 (July)
Pages: 399-424

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Handle: RePEc:eee:jfinin:v:16:y:2007:i:3:p:399-424

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Web page: http://www.elsevier.com/locate/inca/622875

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