Relationship Banking in Bilateral Oligopoly and Asymmetric Information
This paper investigates the economic principles underlying the relationship between the real sector (non-financial) and the banking sector structures. Most literature has so far focused on the structure of conglomerates (Keiretsu/Chaebol) in East Asia in explaining the fast economic growth and/or recent crisis in the region. Traditionally, the strong vertical relationship between core companies and their subsidiaries in the real sector was believed to be a driving force for the economic success in the region. However, the degree of vertical relationship varies depending upon macroeconomic fluctuations and subsequently affects their relationship banks. The paper analyses the information sharing in a bilateral oligopoly framework. When banks prefer strong collaterals and/or credible third party repayment guarantees, a weaker vertical relationship in the real sector should lead to a consolidation in the banking sector via mergers or exits. Empirical evidence from the panel data constructed for the top 10 Chaebols and their subsidiaries between 1994-2002 supports the argument
|Date of creation:||11 Aug 2004|
|Contact details of provider:|| Phone: 1 212 998 3820|
Fax: 1 212 995 4487
Web page: http://www.econometricsociety.org/pastmeetings.asp
More information through EDIRC
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.:
- Diamond, Douglas W, 1991. "Monitoring and Reputation: The Choice between Bank Loans and Directly Placed Debt," Journal of Political Economy, University of Chicago Press, vol. 99(4), pages 689-721, August.
- J. Miguel Villas-Boas & Udo Schmidt-Mohr, 1999. "Oligopoly with Asymmetric Information: Differentiation in Credit Markets," RAND Journal of Economics, The RAND Corporation, vol. 30(3), pages 375-396, Autumn.
- Cerasi, Vittoria & Daltung, Sonja, 2001.
"Diversification and Delegation in Firms,"
Working Paper Series
131, Sveriges Riksbank (Central Bank of Sweden).
- Vittoria Cerasi & Sonja Daltung, 2002. "Diversification and delegation in firms," LSE Research Online Documents on Economics 24907, London School of Economics and Political Science, LSE Library.
- Sonja Daltung & Vittoria Cerasi, 2002. "Diversification and Delegation in Firms," FMG Discussion Papers dp403, Financial Markets Group.
- Chiappori, Pierre-Andre & Perez-Castrillo, David & Verdier, Thierry, 1995. "Spatial competition in the banking system: Localization, cross subsidies and the regulation of deposit rates," European Economic Review, Elsevier, vol. 39(5), pages 889-918, May.
- Chiappori, P.A. & Perez-Castrillo, D. & Verdier, T., 1992. "Spatial Competition in the Banking System: Localization, Cross Subsidies and the Regulation of Deposit Rates," DELTA Working Papers 92-15, DELTA (Ecole normale supérieure).
- Salinger, Michael A, 1989. "The Meaning of "Upstream" and "Downstream" and the Implications for Modeling Vertical Mergers," Journal of Industrial Economics, Wiley Blackwell, vol. 37(4), pages 373-387, June.
- Stiglitz, Joseph E & Weiss, Andrew, 1981. "Credit Rationing in Markets with Imperfect Information," American Economic Review, American Economic Association, vol. 71(3), pages 393-410, June.
- Thakor, Anjan V., 2000. "Relationship Banking," Journal of Financial Intermediation, Elsevier, vol. 9(1), pages 3-5, January.
- Allen N. Berger & Gregory F. Udell, 2002. "Small Business Credit Availability and Relationship Lending: The Importance of Bank Organisational Structure," Economic Journal, Royal Economic Society, vol. 112(477), pages 32-53, February.
- Allen N. Berger & Gregory F. Udell, 2001. "Small business credit availability and relationship lending: the importance of bank organizational structure," Finance and Economics Discussion Series 2001-36, Board of Governors of the Federal Reserve System (U.S.).
- Vickers, John & Waterson, Michael, 1991. "Vertical Relationships: An Introduction," Journal of Industrial Economics, Wiley Blackwell, vol. 39(5), pages 445-450, September.
- Douglas W. Diamond, 1984. "Financial Intermediation and Delegated Monitoring," Review of Economic Studies, Oxford University Press, vol. 51(3), pages 393-414.
- Cowling, Keith & Waterson, Michael, 1976. "Price-Cost Margins and Market Structure," Economica, London School of Economics and Political Science, vol. 43(171), pages 267-274, August.
- Boot, Arnoud W. A., 2000. "Relationship Banking: What Do We Know?," Journal of Financial Intermediation, Elsevier, vol. 9(1), pages 7-25, January.
- Michael A. Salinger, 1988. "Vertical Mergers and Market Foreclosure," The Quarterly Journal of Economics, Oxford University Press, vol. 103(2), pages 345-356. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:ecm:feam04:734. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Christopher F. Baum)
If references are entirely missing, you can add them using this form.