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What determines banks’ customer choice? Evidence from transition countries

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Author Info
De Haas, Ralph
Ferreira, Daniel
Taci, Anita

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Abstract

This paper explores how bank characteristics and the institutional environment influence the composition of banks’ loan portfolios. Using a new data set based on the recent EBRD Banking Environment and Performance Survey (BEPS), which was conducted in 2005 for 220 banks in 20 transition countries, we show that bank characteristics such as ownership and size are important determinants of bank customer focus. In particular, we find that foreign banks are relatively strongly involved in mortgage lending and lending to subsidiaries of foreign companies, while lending relatively less to large domestic firms. We also find that small banks lend relatively more to SMEs than large banks do, while large banks appear to have a comparative advantage in lending to large customers. We do not find much evidence for the hypothesis that better legal credit protection changes bank portfolio composition. An exception is that banks that perceive pledge and mortgage laws to be of high quality focus more on mortgage lending.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 6319.

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Date of creation: 2007
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Handle: RePEc:pra:mprapa:6319

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Related research
Keywords: banking portfolio composition

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Find related papers by JEL classification:
K22 - Law and Economics - - Regulation and Business Law - - - Corporation and Securities Law
F3 - International Economics - - International Finance
P27 - Economic Systems - - Socialist Systems and Transition Economies - - - Performance and Prospects
G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Mortgages

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