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Does internal competition shape bank lending behavior? Evidence from a Chinese bank

Author

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  • Xie, Lu
  • Zhang, Min
  • Song, Xiuyuan
  • Tong, Lijing

Abstract

Using unique proprietary branch-level lending data obtained from a Chinese national bank, this paper investigates when intra-bank competition intensifies, whether turf wars which arise among parallel credit departments and loan officers shape a bank's lending behavior. Our results show that at both the loan officer level and the credit department level, internal competition is associated with larger loan amounts and loan maturity. These results suggest that employees boost loan volume and establish longer lender-borrower relationships to gain competitive advantages in relative evaluations. We also find that branch presidents with government working experience facilitate the influence of internal competition on aggressive bank lending because they may be more likely to set up tournament incentive schemes for employees. Further results demonstrate that fierce external (inter-bank) competition moderates the association between internal competition and lending behavior.

Suggested Citation

  • Xie, Lu & Zhang, Min & Song, Xiuyuan & Tong, Lijing, 2019. "Does internal competition shape bank lending behavior? Evidence from a Chinese bank," Pacific-Basin Finance Journal, Elsevier, vol. 55(C), pages 169-181.
    • Handle: RePEc:eee:pacfin:v:55:y:2019:i:c:p:169-181
    DOI: 10.1016/j.pacfin.2019.03.011
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    Citations

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    Cited by:

    1. Natalya Zelenyuk & Robert Faff & Shams Pathan, 2021. "The impact of voluntary capital adequacy disclosure on bank lending and liquidity creation," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 61(3), pages 3915-3935, September.
    2. Jingxian Zou & Guangjun Shen, 2023. "The impact of tax policy on firm debt maturity: Evidence from China's VAT reform," Economics of Transition and Institutional Change, John Wiley & Sons, vol. 31(2), pages 295-317, April.
    3. Jian Xue & Di Zhu & Laijun Zhao & Chenchen Wang & Hongyang Li, 2019. "Redundancy Identification and Optimization Scheme of Branches for Sustainable Operation of Commercial Banks," Sustainability, MDPI, vol. 11(15), pages 1-19, July.
    4. Guo, Junyan & Fang, Hanqing & Liu, Xuexin & Wang, Cizhi & Wang, Yuan, 2023. "FinTech and financing constraints of enterprises: Evidence from China," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 82(C).

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