Close Competitors? On the Causes and Consequences of Bilateral Competition between Banks

Abstract：   

We interview 361 European bank CEOs to identify their banks’ main competitors. We then provide evidence on the drivers of bilateral bank competition, construct a novel competition measure at the locality level, and assess how well it explains variation in firms’ credit constraints. We find that banks identify another bank as a main competitor in small-business lending when their branch networks overlap, when both are foreign owned or relationship oriented, or when the potential competitor has fewer hierarchical layers. Intense bilateral bank competition increases local credit constraints, especially for small firms, as competition may impede the formation of lending relationships.

Speaker Biography：

Liping Lu is an assistant professor of finance at VU University Amsterdam. His research interests include empirical banking, corporate finance, and development economics. He gained his PhD in Finance at Tilburg University in June 2013. He has published papers in Journal of Financial Intermediation, Journal of Banking and Finance, etc. He holds visiting positions in the European Bank for Reconstruction and Development and the Bank of Finland.