Using a novel way to identify relationship and transaction banks, we study how banks’ lending techniques affect funding to SMEs over the business cycle. For 21 countries we link the lending techniques that banks use in the direct vicinity of firms to these firms’ credit constraints at two...

We show that competing firms relax overall competition by lowering future barriers to entry.We illustrate our findings in a two-period model with adverse selection where banks strategically commit to disclose borrower information.By doing this, they invite rivals to enter their market.Disclosure...

This paper provides evidence on the relationship between finance and growth in a fast growing country, such as China.Employing data of 27 Chinese provinces over the period 1995-2003, we study whether the financial development of two different types of institutions - banks and non-bank financial...

A recent string of theoretical papers has highlighted the importance of geographical distance in explaining loan rates for small firms.Lenders located in the vicinity of small firms face significantly lower transportation and monitoring costs, and hence wield considerable market power, if...

Abstract: We study the competitive and welfare consequences when only one firm must commit to uniform pricing while the competitor’s pricing policy is left unconstrained. The asymmetric no-discrimination constraint prohibits both behaviour-based price discrimination within the competitive...

How do banks react to increased competition?Recent banking theory offers conflicting predictions about the impact of competition on bank orientation - i.e., the choice of relationship based versus transactional banking.We empirically investigate the impact of interbank competition on bank branch...

This paper examines how bank relationships affect firm performance. An empirical implication of recent theoretical models is that firms maintaining multiple bank relationships are less profitable than their single-bank peers. We investigate this empirical implication using a data set containing...

Robust (cross-border) interbank markets are important for the well functioning of modern financial systems.Yet, a network of interbank exposures may lead to domino effects following the event of an initial bank failure.The structure of the interbank market is a potential important driving factor...