Market Structure Screening Activity And Bank Lending Behavior
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Market Structure Screening Activity And Bank Lending Behavior
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Author : Nikolaos I. Papanikolaou
language : en
Publisher:
Release Date : 2013
Market Structure Screening Activity And Bank Lending Behavior written by Nikolaos I. Papanikolaou and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2013 with categories.
In this paper, we construct a spatial model of banking competition that considers the differential information among banks and potential borrowers to investigate how the market structure affects the lending behavior of banks and their incentives to invest in screening technology. Consistent with the prevailing view, our results show that a larger number of banks reduce lending cost, which, in turn, encourages the entry of new customers in the loan market. Also, that market structure has an important impact on banks' incentives to screen loan applicants. In particular, we find that banks invest more in screening as a result of higher competition. This is largely explained by the fact that the number of bad credit applicants increases due to intensified competition. Consequently, banks resort to screening in order to efficiently protect themselves against excessive credit risk-taking. Overall, the paper provides support to a rather close relationship between the industry structure, the lending activity of banks, and bank investment in screening technology.
Essays In Bank Competition And Lending Behavior
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Author : Genuine Martin
language : en
Publisher:
Release Date : 2017
Essays In Bank Competition And Lending Behavior written by Genuine Martin and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2017 with Economics categories.
This dissertation assesses the competitiveness of Tanzania's banking sector using both structural and non-structural (industrial organization) approaches, assesses the predictors of banks' lending behavior, and investigates the bank lending channel of monetary policy transmission process. The first and the second essays utilize bank-level panel data of commercial banks whereas the third employs aggregate time series data. My work contributes to understanding the underlying factors and processes which explain the nature of competition in the banking sector and the conduct of monetary policy in Tanzania. In the first essay, I use the dynamic regression model to test the hypotheses that the market power of banks in Tanzania leads to higher bank profits, by including the lag of the dependent variable among regressors to test the tendency of profits to persist over time, using the market share of banks to test the relative-market-power (RMP) hypothesis, and using concentration ratios to test the structure-conduct-performance (SCP) hypothesis. Using data drawn from twenty-six commercial banks during the 1998-2015 period, I establish from the results that the lag of the dependent variable, market share of banks, and industry concentration ratios (HHIs) have a positive and statistically significant effect on bank profit. These results support moderate persistence of bank profits over time, RMP and SCP hypotheses, as potential explanations of high bank profits. In the second essay, I also use the dynamic regression model to assess potential predictors of commercial banks' lending behavior and the bank lending channel of monetary policy transmission process. Using quarterly panel data for thirty-one commercial banks for the 1998-2015 period, I establish from the results that bank lending persists significantly over time, hence suggesting that some degree of relationship banking and lock-in-effect for lenders and borrowers exists. Although bank size and capital, and inflation rate are associated with higher bank lending, credit risk, private and foreign bank ownership, market power of banks, and the square of inflation rate, have a negative effect on lending. Results for the bank lending channel show that contractionary monetary policy (higher monetary policy indicators) is associated with higher bank lending, and this positive effect of contractionary monetary policy on bank lending is more pronounced in samples of all the banks and medium-sized banks that are more capitalized, in a sample of large banks with more liquidity and capital but with less assets, and in a sample of small banks with less size and capital. By drawing on a country-specific case of Tanzania, this essay is illuminating because results of studies of this nature differ across countries and regions, depending on the structure of the economy, financial sector development, institutional and regulatory environment. In Amidu (2014), determinants of bank lending are different across economic integrations (Economic Community of West African States [ECOWAS], the East African Community [EAC] and the Southern Africa Development Community [SADC]. In the third essay, I use the dynamic regression model (autoregressive process of order one), which empirically applies the theoretical seminal work of Panzar and Rosse (1987) to estimate an index of banking sector contestability, the H statistic, which is the sum of factor price elasticities of the reduced form revenue equation. Using time series data for the 1998-2015 period, the estimated H statistic of 0.57, characterizes Tanzania's banking sector as monopolistic competitive, in which high industry concentration co-exists with considerable contestable pressure. Bank revenues persist moderately over time, whereby interest revenue generation is a key bank activity. Furthermore, the aftermath of the 2006 second-generation financial sector reforms is associated with improved banking industry competitiveness, based on the moving average estimates of the H statistics, and is associated with changes in the banks' production functions, whereby banks substitute less funds (deposits) and physical capital, with more labor. These results are consistent with the dramatic decline in the interest rate spread and an increase in the proportion of labor costs.
Asymmetric Information And The Market Structure Of The Banking Industry
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Author : Mr.Giovanni Dell'Ariccia
language : en
Publisher: International Monetary Fund
Release Date : 1998-06-01
Asymmetric Information And The Market Structure Of The Banking Industry written by Mr.Giovanni Dell'Ariccia and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 1998-06-01 with Business & Economics categories.
The paper analyzes the effects of informational asymmetries on the market structure of the banking industry in a multi-period model of spatial competition. All lenders face uncertainty with regard to borrowers’ creditworthiness, but, in the process of lending, incumbent banks gather proprietary information about their clients, acquiring an advantage over potential entrants. These informational asymmetries are an important determinant of the industry structure and may represent a barrier to entry for new banks. The paper shows that, in contrast with traditional models of horizontal differentiation, the steady-state equilibrium is characterized by a finite number of banks even in the absence of fixed costs.
International Convergence Of Capital Measurement And Capital Standards
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Author :
language : en
Publisher: Lulu.com
Release Date : 2004
International Convergence Of Capital Measurement And Capital Standards written by and has been published by Lulu.com this book supported file pdf, txt, epub, kindle and other format this book has been release on 2004 with Bank capital categories.
Banking And Trading
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Author : Mr.Arnoud W.A. Boot
language : en
Publisher: International Monetary Fund
Release Date : 2012-10-02
Banking And Trading written by Mr.Arnoud W.A. Boot and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2012-10-02 with Business & Economics categories.
We study the effects of a bank's engagement in trading. Traditional banking is relationship-based: not scalable, long-term oriented, with high implicit capital, and low risk (thanks to the law of large numbers). Trading is transactions-based: scalable, shortterm, capital constrained, and with the ability to generate risk from concentrated positions. When a bank engages in trading, it can use its ‘spare’ capital to profitablity expand the scale of trading. However, there are two inefficiencies. A bank may allocate too much capital to trading ex-post, compromising the incentives to build relationships ex-ante. And a bank may use trading for risk-shifting. Financial development augments the scalability of trading, which initially benefits conglomeration, but beyond some point inefficiencies dominate. The deepending of the financial markets in recent decades leads trading in banks to become increasingly risky, so that problems in managing and regulating trading in banks will persist for the foreseeable future. The analysis has implications for capital regulation, subsidiarization, and scope and scale restrictions in banking.
Bank Lending In The Knowledge Economy
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Author : Mr.Giovanni Dell'Ariccia
language : en
Publisher: International Monetary Fund
Release Date : 2017-11-07
Bank Lending In The Knowledge Economy written by Mr.Giovanni Dell'Ariccia and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2017-11-07 with Business & Economics categories.
We study bank portfolio allocations during the transition of the real sector to a knowledge economy in which firms use less tangible capital and invest more in intangible assets. We show that, as firms shift toward intangible assets that have lower collateral values, banks reallocate their portfolios away from commercial loans toward other assets, primarily residential real estate loans and liquid assets. This effect is more pronounced for large and less well capitalized banks and is robust to controlling for real estate loan demand. Our results suggest that increased firm investment in intangible assets can explain up to 20% of bank portfolio reallocation from commercial to residential lending over the last four decades.
Formal Finance And Trade Credit During China S Transition
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Author : Robert J. Cull
language : en
Publisher: World Bank Publications
Release Date : 2007
Formal Finance And Trade Credit During China S Transition written by Robert J. Cull and has been published by World Bank Publications this book supported file pdf, txt, epub, kindle and other format this book has been release on 2007 with Access To Cred Bank categories.
Using a large panel dataset of Chinese industrial firms, the authors examine the determinants of access to loans from formal financial intermediaries and extension of trade credit. Poorly performing state-owned enterprises were more likely to redistribute credit to firms with less privileged access to loans through trade credit, a pattern consistent with some of the extension of trade credit being involuntary. By contrast, profitable private domestic firms were more likely to extend trade credit than unprofitable ones. Trade credit likely provided a substitute for loans for these private firms' customers that were shut out of formal credit markets. As biases in lending became less severe, the amount of trade credit extended by private firms declined.
Basel Iii And Bank Lending Evidence From The United States And Europe
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Author : Mr.Sami Ben Naceur
language : en
Publisher: International Monetary Fund
Release Date : 2017-11-15
Basel Iii And Bank Lending Evidence From The United States And Europe written by Mr.Sami Ben Naceur and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2017-11-15 with Business & Economics categories.
Using data on commercial banks in the United States and Europe, this paper analyses the impact of the new Basel III capital and liquidity regulation on bank-lending following the 2008 financial crisis. We find that U.S. banks reinforce their risk absorption capacities when expanding their credit activities. Capital ratios have significant, negative impacts on bank-retail-and-other-lending-growth for large European banks in the context of deleveraging and the “credit crunch” in Europe over the post-2008 financial crisis period. Additionally, liquidity indicators have positive but perverse effects on bank-lending-growth, which supports the need to consider heterogeneous banks’ characteristics and behaviors when implementing new regulatory policies.
Banking Competition And Capital Ratios
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Author : Martin Cihák
language : en
Publisher: International Monetary Fund
Release Date : 2007-09
Banking Competition And Capital Ratios written by Martin Cihák and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2007-09 with Business & Economics categories.
We use data for more than 2,600 European banks to test whether increased competition causes banks to hold higher capital ratios. Employing panel data techniques, and distinguishing between the competitive conduct of small and large banks, we show that banks tend to hold higher capital ratios when operating in a more competitive environment. This result holds when controlling for the degree of concentration in banking systems, inter-industry competition, characteristics of the wider financial system, and the regulatory and institutional environment.
Bank Size And Systemic Risk
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Author : Mr.Luc Laeven
language : en
Publisher: International Monetary Fund
Release Date : 2014-05-08
Bank Size And Systemic Risk written by Mr.Luc Laeven and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2014-05-08 with Business & Economics categories.
The proposed SDN documents the evolution of bank size and activities over the past 20 years. It discusses whether this evolution can be explained by economies of scale or “too big to fail” subsidies. The paper then presents evidence on the extent to which bank size and market-based activities contribute to systemic risk. The paper concludes with policy messages in the area of capital regulation and activity restrictions to reduce the systemic risk posed by large banks. The analysis of the paper complements earlier Fund work, including SDN 13/04 and the recent GFSR chapter on “too big to fail” subsidies, and its policy message is in line with this earlier work.