Competition and Relationship Lending: Friends or Foes?

By A. Presbitero, A. Zazzaro. Social Science Research Network, 2011

200 citations recorded by the source corpus.

Recent empirical findings by Elsas (2005) and Degryse and Ongena (2007) document a U-shaped effect of market concentration on relationship lending which cannot be easily accommodated by the investment and strategic theories of relationship lending. In this paper, we suggest that this non-monotonicity can be explained by looking at the organizational structure of local credit markets. We provide evidence that marginal increases in interbank competition are detrimental to relationship lending in markets where large and out-of-market banks are predominant. On the contrary, where relational-based lending technologies are al-ready widely in use in the market by a large group of small mutual banks, an increase in competition may drive banks to further cultivate their extensive ties with customers.

Subfields: Accounting, Finance, Strategy and Management

View Paper: https://www.semanticscholar.org/paper/f36f92fcd0b6f3c4cd9f2d2812b1e1cf55246b62

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Citations in the corpus

The Home Bias and the Credit Crunch: A Regional Perspective (2014, result): “Similar findings with regard to France are documented by Djedidi (2010), while Presbitero and Zazzaro (2011), again with Italian data, find that in highly competitive markets the presence of functionally distant banks is detrimental to relationship lending.”
How Does Capital Affect Bank Performance During Financial Crises (2013, unknown): “Rossi (2010) suggests that brokered deposits do not directly explain bank failure, but Federal Deposit Insurance Corporation (2011) and Cole and White (2012) suggest otherwise.”
A Darker Side to Decentralized Banks: Market Power and Credit Rationing in SME Lending (2012, unknown): “(footnote continued) Presbitero and Zazzaro (2011) examine the interaction between bank size and market structure, but their focus is on banks' ability to engage in relationship lending rather than their ability to use soft information to their advantage.”