Bank Competition and Enterprise restructuring in Transition Economies

Schnitzer, Monika (1998): Bank Competition and Enterprise restructuring in Transition Economies. Discussion Paper / Centre for Economic Policy Research (CEPR),

Abstract

We investigate how bank competition affects the efficiency of credit allocation, using a model of spatial competition. Our analysis shows that bad loans are more likely the larger the number of banks competing for customers. We study further how many banks will be active if market entry is not regulated. Free entry can induce too much entry and thus too many bad loans compared to the social optimum. Finally, we analyse how bank competition affects the firms’ restructuring effort. We find that restructuring has positive externalities that give rise to multiple equilibria, with either much or little restructuring activity. ; Bank Competition; market entry; Restructuring; screening; Transition Economies

• Item Type: Paper
• Faculties: Economics; Economics > Chairs > Seminar for Comparative Economics
• Subjects: 300 Social sciences > 330 Economics
• Language: English