Citation

Discussion Paper Details

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Title: Close Competitors? On the Causes and Consequences of Bilateral Bank Competition

Author(s): Ralph de Haas, Liping Lu and Steven Ongena

Publication Date: July 2020

Keyword(s): Bilateral bank competition, credit constraints and multimarket contact

Programme Area(s): Financial Economics

Abstract: We interview 379 European bank CEOs to identify their banks' main competitors. We then provide evidence on the drivers of bilateral bank competition, construct a novel competition measure at the locality level, and assess how well it explains variation in firms' credit constraints. We find that banks identify another bank as a main competitor in small-business lending when their branch networks overlap, when both are foreign owned or relationship oriented, or when the potential competitor has fewer hierarchical layers. Intense bilateral bank competition increases local credit constraints, especially for small firms, as competition may impede the formation of lending relationships.

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Bibliographic Reference

de Haas, R, Lu, L and Ongena, S. 2020. 'Close Competitors? On the Causes and Consequences of Bilateral Bank Competition'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=15015