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Does Bank Branch Competition Alleviate Household Credit Constraints?Evidence from Korean Household Data

Author

Listed:
  • Saeyeon Oh

    (Department of Economics, Sogang University, Seoul)

  • Jungsoo Park

Abstract

This paper provides empirical evidence on how bank branch competition affects household credit constraints based on Korean household and nation-wide bank branch data. The main findings are as follow. First, regression results show that banks alleviate household credit constraint when bank branch competition is strong. Second, relaxation of credit constraint occurs at the internal margin, while external margin is not affected. Finally, main beneficiaries from increase in banking competition are older households with head age 35 or above. These results are consistent with the fact that most Korean banks are multi-branch nation-wide banks transacting based on hard information. Banks are compelled to provide more household credit in order to compensate for the lower profitability in competitive market.

Suggested Citation

  • Saeyeon Oh & Jungsoo Park, 2015. "Does Bank Branch Competition Alleviate Household Credit Constraints?Evidence from Korean Household Data," Working Papers 1501, Nam Duck-Woo Economic Research Institute, Sogang University (Former Research Institute for Market Economy).
    • Handle: RePEc:sgo:wpaper:1501
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    References listed on IDEAS

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    Keywords

    Bank branch competition; credit constraints; information asymmetry;
    All these keywords.

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy

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