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What determines banks’ customer choice? Evidence from transition countries

  • De Haas, Ralph
  • Ferreira, Daniel
  • Taci, Anita

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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  10. Berger, Allen N. & Udell, Gregory F., 2006. "A more complete conceptual framework for SME finance," Journal of Banking & Finance, Elsevier, vol. 30(11), pages 2945-2966, November.
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  14. Clarke, George R. G. & Cull, Robert & Martinez Peria, Maria Soledad, 2001. "Does foreign bank penetration reduce access to credit in developing countries"evidence from asking borrowers," Policy Research Working Paper Series 2716, The World Bank.
  15. Giannetti, Mariassunta & Ongena, Steven, 2005. "Financial integration and entrepreneurial activity: evidence from foreign bank entry in emerging markets," Working Paper Series 0498, European Central Bank.
  16. Robert DeYoung & Lawrence G. Goldberg & Lawrence J. White, 1997. "Youth, Adolescence, and Maturity of Banks: Credit Availability to Small Business in an Era of Banking Consolidation," New York University, Leonard N. Stern School Finance Department Working Paper Seires 98-025, New York University, Leonard N. Stern School of Business-.
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