Competition between arm's length and relational lenders: Who wins the contest?

Drexler A, Guettler A, Taskin AA (2023)

Publication Type: Journal article

Publication year: 2023

Journal

Journal of International Money and Finance Elsevier

Book Volume: 137

Article Number: 102897

DOI: 10.1016/j.jimonfin.2023.102897

Abstract

Using geo-coded data with the location of bank branches and borrowers, we study the effect of bank competition on lending. The impact of competition depends on the incumbent's and the entrant's lending technologies. The addition of a relational lenders’ branch increases the probability of exit of and reduces the size of loans issued by all types of incumbents, while the opening of a branch by an arm's length lender only affects the probability of exit from arm's length incumbents. We believe relational lenders can compete more effectively by extracting and using private information unavailable to arm's length entrants.

Involved external institutions

Federal Reserve Bank of Chicago US United States (USA) (US) Universität Ulm DE Germany (DE) Institut für Arbeitsmarkt- und Berufsforschung (IAB) der Bundesagentur für Arbeit (BA) DE Germany (DE)

How to cite

APA:

Drexler, A., Guettler, A., & Taskin, A.A. (2023). Competition between arm's length and relational lenders: Who wins the contest? Journal of International Money and Finance, 137. https://dx.doi.org/10.1016/j.jimonfin.2023.102897

MLA:

Drexler, Alejandro, Andre Guettler, and Ahmet Ali Taskin. "Competition between arm's length and relational lenders: Who wins the contest?" Journal of International Money and Finance 137 (2023).

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