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Bank Competition and Enterprise restructuring in Transition Economies

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Author Info
Schnitzer, Monika

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Abstract

We investigate how bank competition affects the efficiency of credit allocation, using a model of spatial competition. Our analysis shows that bad loans are more likely the larger the number of banks competing for customers. We study further how many banks will be active if market entry is not regulated. Free entry can induce too much entry and thus too many bad loans compared to the social optimum. Finally, we analyse how bank competition affects the firms' restructuring effort. We find that restructuring has positive externalities that give rise to multiple equilibria, with either much or little restructuring activity.

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Publisher Info
Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 2045.

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Date of creation: Dec 1998
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Handle: RePEc:cpr:ceprdp:2045

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Related research
Keywords: Bank Competition; market entry; Restructuring; screening; Transition Economies;

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

Cited by:
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  1. 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!]
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  2. Malyutina Marina & Parilova Svetlana, 2003. "Bank failures in Russia: why do banks go bankrupt?," EERC Working Paper Series 00-073e, EERC Research Network, Russia and CIS. [Downloadable!]
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