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The Impact of Competition on Bank Orientation and Specialization

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Author Info
Degryse, Hans
Ongena, Steven

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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.

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Publisher Info
Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number CESifo Working Paper No. 1119.

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Date of creation: 2004
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Handle: RePEc:ces:ceswps:_1119

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Related research
Keywords: bank orientation; bank industry specialization; competition; lending relationships;

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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.)

  1. Moshe Kim & Eirik Gaard Kristiansen & Bent Vale, 2005. "What determines banks’ market power? Akerlof versus Herfindahl," Working Paper 2005/8, Norges Bank. [Downloadable!]
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