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Bank Competition and Enterprise restructuring in Transition Economies

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  • Schnitzer, Monika

Abstract

We investigate how bank competition affects the efficiency of credit allocation, using a model of spatial competition. Our analysis shows that bad loans are more likely the larger the number of banks competing for customers. We study further how many banks will be active if market entry is not regulated. Free entry can induce too much entry and thus too many bad loans compared to the social optimum. Finally, we analyse how bank competition affects the firms' restructuring effort. We find that restructuring has positive externalities that give rise to multiple equilibria, with either much or little restructuring activity.

Suggested Citation

  • Schnitzer, Monika, 1998. "Bank Competition and Enterprise restructuring in Transition Economies," CEPR Discussion Papers 2045, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:2045
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    Citations

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    Cited by:

    1. Hainz, Christa, 2007. "The Effect of Bank Competition on the Bank's Incentive to Collateralize," Discussion Papers in Economics 2007, University of Munich, Department of Economics.
    2. Christa Hainz, 2004. "Are Transition Countries Overbanked? The Effect of Institutions on Bank Market Entry," German Economic Review, Verein für Socialpolitik, vol. 5(2), pages 237-256, May.
    3. Hermann Clement & Alexandra Reppegather, 2002. "Effektivität der Förderbankkredite für KMU in Mittel- und Osteuropa. (Unter besonderer Berücksichtigung der Situation in Ungarn und Ukraine)," Working Papers 239, Leibniz Institut für Ost- und Südosteuropaforschung (Institute for East and Southeast European Studies).
    4. Bogdan Capraru, 2010. "The Romanian Banking Competition And The Accession To Eu," Annals of Faculty of Economics, University of Oradea, Faculty of Economics, vol. 1(1), pages 399-404, July.

    More about this item

    Keywords

    Bank Competition; market entry; Restructuring; screening; Transition Economies;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • P31 - Political Economy and Comparative Economic Systems - - Socialist Institutions and Their Transitions - - - Socialist Enterprises and Their Transitions
    • P34 - Political Economy and Comparative Economic Systems - - Socialist Institutions and Their Transitions - - - Finance

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