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The Impact of Competition on Bank Orientation

How do banks react to increased competition? Recent banking theory significantly disagrees regarding the impact of competition on bank orientation—i.e., the choice of relationship-based versus transactional banking. We empirically investigate the impact of interbank competition on bank branch orientation. We employ a unique data set containing detailed information on bank–firm relationships. We find that bank branches facing stiff local competition engage considerably more in relationship-based lending. Our results illustrate that competition and relationships are not necessarily inimical.

15. July 2007

Authors Hans Degryse Steven Ongena

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Professor Hans Degryse, PhD
Professor Hans Degryse, PhD

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