Bank mergers and the fragility of loan markets
AbstractWe address the question of whether competition makes loan markets more fragile in the sense of increasing the equilibrium bankruptcy risk of firms. This is done using a model of the interaction between the concentration of the banking sector and the investment strategies of imperfectly competitive product market firms. It is shown how a merger between two competing bilateral monopoly banks will typically decrease the interest rate and increase the investment volumes of firms if the investment decisions are strategic complements. Under plausible conditions this implies that a merger will lessen, not aggravate, the fragility of loan markets.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by Finnish Economic Association in its journal Finnish Economic Papers.
Volume (Year): 13 (2000)
Issue (Month): 1 (Spring)
Find related papers by JEL classification:
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
- G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation
- G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Sudipto Dasgupta & Sheridan Titman, 1996.
"Pricing Strategy and Financial Policy,"
NBER Working Papers
5498, National Bureau of Economic Research, Inc.
- Yanelle, Marie-Odile, 1997. "Banking Competition and Market Efficiency," Review of Economic Studies, Wiley Blackwell, vol. 64(2), pages 215-39, April.
- Brander, J.A. & Poitevin, M., 1988.
"Managerial Compensation and the Agency Costs of Debt Finance,"
Cahiers de recherche
8827, Universite de Montreal, Departement de sciences economiques.
- Brander, J.A. & Poitevin, M., 1988. "Managerial Compensation And The Agency Costs Of Debt Finance," Cahiers de recherche 8827, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
- Michel Poitevin, 1989. "Collusion and the Banking Structure of a Duopoly," Canadian Journal of Economics, Canadian Economics Association, vol. 22(2), pages 263-77, May.
- Sherril Shaffer, 1997.
"The winner's curse in banking,"
97-25, Federal Reserve Bank of Philadelphia.
- Kyle Bagwell & Robert W. Staiger, 1989.
"The Sensitivity of Strategic and Corrective R&D Policy in Oligopolistic Industries,"
869, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Bagwell, Kyle & Staiger, Robert W., 1994. "The sensitivity of strategic and corrective R&D policy in oligopolistic industries," Journal of International Economics, Elsevier, vol. 36(1-2), pages 133-150, February.
- Robert W. Staiger & Kyle Bagwell, 1990. "The Sensitivity of Strategic and Corrective R&D Policy in Oligopolistic Industries," NBER Working Papers 3236, National Bureau of Economic Research, Inc.
- Giovanni Dell'Ariccia, 1998. "Asymmetric Information and the Market Structure of the Banking Industry," IMF Working Papers 98/92, International Monetary Fund.
- Mitchell A. Petersen & Raghuram G. Rajan, 1994.
"The Effect of Credit Market Competition on Lending Relationships,"
NBER Working Papers
4921, National Bureau of Economic Research, Inc.
- Petersen, Mitchell A & Rajan, Raghuram G, 1995. "The Effect of Credit Market Competition on Lending Relationships," The Quarterly Journal of Economics, MIT Press, vol. 110(2), pages 407-43, May.
- Abel, Andrew B., 1990.
"Consumption and investment,"
Handbook of Monetary Economics,
in: B. M. Friedman & F. H. Hahn (ed.), Handbook of Monetary Economics, edition 1, volume 2, chapter 14, pages 725-778
- Bolton, Patrick & Scharfstein, David S, 1996. "Optimal Debt Structure and the Number of Creditors," Journal of Political Economy, University of Chicago Press, vol. 104(1), pages 1-25, February.
- Gerhard Clemenz & Mona Ritthaler, 1992. "Credit markets with asymmetric information : a survey," Finnish Economic Papers, Finnish Economic Association, vol. 5(1), pages 12-26, Spring.
- Broecker, Thorsten, 1990. "Credit-Worthiness Tests and Interbank Competition," Econometrica, Econometric Society, vol. 58(2), pages 429-52, March.
- Bhattacharya, Sudipto & Boot, Arnoud W A & Thakor, Anjan V, 1998.
"The Economics of Bank Regulation,"
Journal of Money, Credit and Banking,
Blackwell Publishing, vol. 30(4), pages 745-70, November.
- Michael H. Riordan, 1992. "Competition and Bank Performance: A Theoretical Perspective," Papers 0026, Boston University - Industry Studies Programme.
- Kiminiori Matsuyama, 1994.
"Complementaries and Cumulative Processes In Models of Monopolistic Competition,"
1106, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Kiminori Matsuyama, 1995. "Complementarities and Cumulative Processes in Models of Monopolistic Competition," Journal of Economic Literature, American Economic Association, vol. 33(2), pages 701-729, June.
- Harris, Christopher & Vickers, John, 1987. "Racing with Uncertainty," Review of Economic Studies, Wiley Blackwell, vol. 54(1), pages 1-21, January.
- Stiglitz, Joseph E, 1985. "Credit Markets and the Control of Capital," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 17(2), pages 133-52, May.
- Gehrig, Thomas, 1998.
"Screening, Cross-Border Banking and the Allocation of Credit,"
CEPR Discussion Papers
1973, C.E.P.R. Discussion Papers.
- Gehrig, Thomas, 1998. "Screening, cross-border banking, and the allocation of credit," Research in Economics, Elsevier, vol. 52(4), pages 387-407, December.
- Allen N. Berger & Gerald A. Hanweck & David B. Humphrey, 1986.
"Competitive viability in banking: scale, scope, and product mix economies,"
Research Papers in Banking and Financial Economics
82, Board of Governors of the Federal Reserve System (U.S.).
- Berger, Allen N. & Hanweck, Gerald A. & Humphrey, David B., 1987. "Competitive viability in banking : Scale, scope, and product mix economies," Journal of Monetary Economics, Elsevier, vol. 20(3), pages 501-520, December.
- Koskela, Erkki & Stenbacka, Rune, 2000. "Is there a tradeoff between bank competition and financial fragility?," Journal of Banking & Finance, Elsevier, vol. 24(12), pages 1853-1873, December.
- Shaffer, Sherrill, 2001. "Banking conduct before the European single banking license: a cross-country comparison," The North American Journal of Economics and Finance, Elsevier, vol. 12(1), pages 79-104, March.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Editorial Secretary).
If references are entirely missing, you can add them using this form.