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Bank market power and loan growth

In: Handbook of Competition in Banking and Finance

Author

Listed:
  • Manthos D. Delis
  • Iftekhar Hasan
  • Sotirios Kokas
  • Liuling Liu
  • Nikolaos Mylonidis

Abstract

The authors explore the impact of bank market power on the provision of credit using multi-year, bank-level data from 131 countries. Their findings reconcile the opposing views of the theory on this matter and indicate the existence of a U-shaped relationship between bank market power and loan growth. Specifically, they find that high market power, as measured by high values of the Lerner index, diminishes bank loan growth in accordance with the traditional industrial organization approach. However, they also document that, after a certain threshold, a further increase in bank market power results in greater credit expansion in line with the information hypothesis. These findings are robust to the inclusion of country-specific time effects and to alternative variants of the Lerner index.

Suggested Citation

  • Manthos D. Delis & Iftekhar Hasan & Sotirios Kokas & Liuling Liu & Nikolaos Mylonidis, 2017. "Bank market power and loan growth," Chapters, in: Jacob A. Bikker & Laura Spierdijk (ed.), Handbook of Competition in Banking and Finance, chapter 18, pages 383-400, Edward Elgar Publishing.
    • Handle: RePEc:elg:eechap:16878_18
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    Cited by:

    1. Biao Mi & Liang Han, 2020. "Banking market concentration and syndicated loan prices," Review of Quantitative Finance and Accounting, Springer, vol. 54(1), pages 1-28, January.
    2. José Manuel Mansilla-Fernández, 2020. "Non-Performing loans, financial stability, and banking competition: evidence for listed and non-listed Eurozone banks," Hacienda Pública Española / Review of Public Economics, IEF, vol. 232(1), pages 29-52, March.

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    Keywords

    Economics and Finance;

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