On the Role of Bank Competition for Corporate Finance and Corporate Control in Transition Economies

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On the Role of Bank Competition for Corporate Finance and Corporate Control in Transition Economies

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Monika Schnitzer

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Monika Schnitzer

Abstract

Banks play a central role in financing and monitoring firms in transition economies. We study how bank competition affects the efficiency of the credit allocation, the monitoring of firms, and the firms' restructuring effort. In our model, banks compete to finance an investment project with uncertain return. By screening the firm, a bank learns about its profitability. Surprisingly, we find that an increase in bank competition need not reduce a bank's screening incentives even though it lowers its expected profits. Furthermore, competition has a positive impact on the firm's restructuring effort. This suggests a positive role for bank competition in transition economies.

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Article provided by Mohr Siebeck, Tübingen in its journal Journal of Institutional and Theoretical Economics.

Volume (Year): 155 (1999)
Issue (Month): 1 (March)
Pages: 22-
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Handle: RePEc:mhr:jinste:urn:sici:0932-4569(199903)155:1_22:otrobc_2.0.tx_2-2

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Paper
- Schnitzer, Monika, 1998. "On the Role of Bank Competition for Corporate Finance and Corporate Control in Transition Economies," CEPR Discussion Papers 2013, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)

Find related papers by JEL classification:
D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Mortgages
G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
P31 - Economic Systems - - Socialist Institutions and Their Transitions - - - Socialist Enterprises and Their Transitions
P34 - Economic Systems - - Socialist Institutions and Their Transitions - - - Finance

References listed on IDEAS
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.:

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Other versions:
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Other versions:
- Schmidt, Klaus M., 1996. "Managerial Incentives and Product Market Competition," CEPR Discussion Papers 1382, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)

Full references

Cited by:
(explanations, 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.)

Hainz, Christa, 2004. "Quality of Institutions, Credit Markets and Bankruptcy," Discussion Papers in Economics 388, University of Munich, Department of Economics. [Downloadable!]
Other versions:
- Christa Hainz, 2004. "Quality of Institutions, Credit Markets and Bankruptcy," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
- Hainz, Christa, 2005. "Quality of Institutions, Credit Markets and Bankruptcy," Proceedings of the German Development Economics Conference, Kiel 2005 18, Verein für Socialpolitik, Research Committee Development Economics. [Downloadable!]
- Christa Hainz, 2005. "Quality of Institutions, Credit Markets and Bankruptcy," William Davidson Institute Working Papers Series wp745, William Davidson Institute at the University of Michigan Stephen M. Ross Business School. [Downloadable!]
Hans Degryse & Steven Ongena, 2004. "Bank orientation and industry specialization," Proceedings, Federal Reserve Bank of Chicago, issue May, pages 412-427. [Downloadable!]
Hainz, Christa, 2007. "The Effect of Bank Competition on the Bank's Incentive to Collateralize," Discussion Papers in Economics 2007, University of Munich, Department of Economics. [Downloadable!]
Other versions:
- Christa Hainz, 2007. "The Effect of Bank Competition on the Bank’s Incentive to Collateralize," Discussion Papers 216, SFB/TR 15 Governance and the Efficiency of Economic Systems, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich. [Downloadable!]
Yoshiaki Ogura, 2006. "Endogenous Relationship Banking to Alleviate Excessive Screening Transaction Banking," Discussion Paper Series a487, Institute of Economic Research, Hitotsubashi University. [Downloadable!]
Hainz , Christa & Weill , Laurent & Godlewski, Christophe, 2008. "Bank competition and collateral: theory and evidence," Research Discussion Papers 27/2008, Bank of Finland. [Downloadable!]
Other versions:
- Christa Hainz & Laurent Weill & Christophe J. Godlewski, 2008. "Bank Competition and Collateral: Theory and Evidence," Working Papers of LaRGE (Laboratoire de Recherche en Gestion et Economie) 2008-19, Laboratoire de Recherche en Gestion et Economie, Université de Strasbourg (France). [Downloadable!]
Christa Hainz, 2008. "Bank competition - When is it Goog?," Discussion Papers 244, SFB/TR 15 Governance and the Efficiency of Economic Systems, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich. [Downloadable!]
Calin Valsan, 2001. "Three Measures of Corporate Restructuring in a Transition Economy: the Case of Newly Privatised Romanian Companies," Post-Communist Economies, Taylor and Francis Journals, vol. 13(1), pages 121-128, March. [Downloadable!] (restricted)
Ongena, S. & Degryse, H.A., 2003. "The impact of competition on bank orientation and specialization," Discussion Paper 108, Tilburg University, Center for Economic Research. [Downloadable!]
Other versions:
- Degryse, Hans & Ongena, Steven, 2004. "The Impact of Competition on Bank Orientation and Specialization," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
- Degryse, Hans & Ongena, Steven, 2004. "The Impact of Competition on Bank Orientation and Specialization," CEPR Discussion Papers 4543, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)

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