Wagner, Wolf - Tilburg University, Tilburg Law and Economic Center - 2007
Recent literature (Boyd and De Nicoló, 2005) has argued that competition in the loan market lowers bank risk by … reducing the risk-taking incentives of borrowers. We show that the impact of loan market competition on banks is reversed if … their balance sheet and switch to higher-risk lending. They even overcompensate the effect of safer borrowers because loan …