Banking Competition and Soft Budget Constraints: How Market Power can threaten Discipline in Lending

In imperfectly competitive credit markets, banks can face a tradeoff between exploiting their market power and enforcing hard budget constraints. As market power rises, banks eventually find it too costly to discipline underperforming borrowers by stopping their projects. Lending relationships become too cozy, interest rates rise, and loan performance deteriorates.

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Year of publication:	2012
Authors:	Arping, Stefan
Publisher:	Amsterdam and Rotterdam : Tinbergen Institute
Subject:	Banking Competition \| Soft Budget Constraint Problem \| Moral Hazard

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Series:	Tinbergen Institute Discussion Paper ; 12-146/IV/DSF49
Type of publication:	Book / Working Paper
Type of publication (narrower categories):	Working Paper
Language:	English
Other identifiers:	769995624 [GVK] hdl:10419/87463 [Handle] RePEc:dgr:uvatin:20120146 [RePEc]
Classification:	G2 - Financial Institutions and Services ; G3 - Corporate Finance and Governance
Source:	EconStor

Persistent link: https://www.econbiz.de/10010326445