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Nothing Special About Banks: Competition and Bank Lending in Britain, 1885–1925

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  • Fabio Braggion
  • Narly Dwarkasing
  • Lyndon Moore

Abstract

We investigate the impact of increasing bank concentration on bank loan contracts in a lightly regulated environment that allows us to abstract from possible confounding effects of regulation and focus on the “pure” effects of competition on bank lending. We study over 30,000 British bank loans over the period 1885 to 1925. Borrowers in counties with high bank concentration received smaller loans and posted more collateral than borrowers in other counties. In high concentration counties, the quality of loan applicants improved, suggesting that banks restricted credit, not that the quality of loan applicants had worsened. Received February 4, 2016; editorial decision December 20, 2016 by Editor Philip Strahan.

Suggested Citation

  • Fabio Braggion & Narly Dwarkasing & Lyndon Moore, 2017. "Nothing Special About Banks: Competition and Bank Lending in Britain, 1885–1925," The Review of Financial Studies, Society for Financial Studies, vol. 30(10), pages 3502-3537.
    • Handle: RePEc:oup:rfinst:v:30:y:2017:i:10:p:3502-3537.
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    File URL: http://hdl.handle.net/10.1093/rfs/hhx044
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    Citations

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    Cited by:

    1. Yuliyan Mitkov & Ulrich Schüwer, 2021. "Unequal andunstable: income inequality and bank risk," ECONtribute Discussion Papers Series 012, University of Bonn and University of Cologne, Germany.
    2. Òscar Jordà & Björn Richter & Moritz Schularick & Alan M Taylor, 2021. "Bank Capital Redux: Solvency, Liquidity, and Crisis," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 88(1), pages 260-286.
    3. Shen, Yu & Ren, Meixu & Zhao, Jingmei, 2023. "Bank competition and zombie company: Empirical evidence from China," Economic Analysis and Policy, Elsevier, vol. 80(C), pages 297-318.
    4. Braggion, Fabio & Dwarkasing, Narly & Moore, Lyndon, 2022. "Value creating mergers: British bank consolidation, 1885–1925," Explorations in Economic History, Elsevier, vol. 83(C).
    5. Bednarek, Peter & Dinger, Valeriya & Kaat, Daniel Marcel te & Westernhagen, Natalja von, 2021. "To whom do banks channel central bank funds?," Journal of Banking & Finance, Elsevier, vol. 128(C).
    6. Jansson, Walter, 2018. "Stock markets, banks and economic growth in the UK, 1850–1913," Financial History Review, Cambridge University Press, vol. 25(3), pages 263-296, December.
    7. Berger, Allen N. & Guedhami, Omrane & Kim, Hugh H. & Li, Xinming, 2022. "Economic policy uncertainty and bank liquidity hoarding," Journal of Financial Intermediation, Elsevier, vol. 49(C).
    8. Bednarek, Peter & Dinger, Valeriya & te Kaat, Daniel Marcel & von Westernhagen, Natalja, 2020. "Central bank funding and credit risk-taking," Discussion Papers 36/2020, Deutsche Bundesbank.
    9. Ren, Meixu & Zhao, Jingmei & Ke, Konglin & Li, Yidong, 2023. "Bank homogeneity and risk-taking: Evidence from China," The Quarterly Review of Economics and Finance, Elsevier, vol. 92(C), pages 142-154.
    10. Vo, Xuan Vinh, 2018. "Bank lending behavior in emerging markets," Finance Research Letters, Elsevier, vol. 27(C), pages 129-134.
    11. Stefan Gissler & Rodney Ramcharan & Edison Yu, 2018. "The Effects of Competition in Consumer Credit Markets," Working Papers 18-24, Federal Reserve Bank of Philadelphia.
    12. Biswas, Swarnava (Sonny) & Koufopoulos, Kostas, 2020. "Bank competition and financing efficiency under asymmetric information," Journal of Corporate Finance, Elsevier, vol. 65(C).
    13. Ren, Meixu & Zhao, Jinxuan & Zhao, Jingmei, 2023. "The crowding-out effect of zombie companies on fixed asset investment: Evidence from China," Research in International Business and Finance, Elsevier, vol. 65(C).
    14. Braggion, Fabio & Dwarkasing, Narly & Moore, Lyndon, 2020. "Value creating mergers – British bank consolidation, 1885-1925," CEPR Discussion Papers 14663, C.E.P.R. Discussion Papers.
    15. Zhou, Yifan, 2023. "Politically influenced bank lending," Journal of Banking & Finance, Elsevier, vol. 157(C).
    16. Pascal Böni & Heinz Zimmermann, 2024. "The Credit Suisse bailout in hindsight: not a bitter pill to swallow, but a case to follow," Financial Markets and Portfolio Management, Springer;Swiss Society for Financial Market Research, vol. 38(1), pages 1-35, March.

    More about this item

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • N23 - Economic History - - Financial Markets and Institutions - - - Europe: Pre-1913

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