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The Impact of Competition on Bank Orientation and Specialization (new titel: The impact of competition on bank orientation)

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  • Hans Degryse
  • Steven Ongena

Abstract

How do banks react to increased interbank competition? Recent banking theory offers conflicting predictions about the impact of competition on bank orientation - i.e., the choice of relationship based versus transactional banking - and bank industry specialization. We empirically investigate the impact of interbank competition on bank branch orientation and specialization. We employ a unique data set containing detailed information on bank-firm relationships and industry classification. We find that bank branches facing stiff local competition engage relatively more in relationship-based lending but specialize somewhat less in a particular industry. Our results illustrate that competition and relationships are not necessarily inimical.

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  • Hans Degryse & Steven Ongena, 2004. "The Impact of Competition on Bank Orientation and Specialization (new titel: The impact of competition on bank orientation)," CESifo Working Paper Series 1119, CESifo.
    • Handle: RePEc:ces:ceswps:_1119
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    1. Moshe Kim & Eirik Gaard Kristiansen & Bent Vale, 2005. "What determines banks’ market power? Akerlof versus Herfindahl," Working Paper 2005/8, Norges Bank.

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    bank orientation; bank industry specialization; competition; lending relationships;
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