Can Relationship Banking Survive Competition?

Arnoud Boot and Anjan Thakor ()

Journal of Finance, 2000, vol. 55, issue 2, 679-713

Abstract: How will banks evolve as competition increases from other banks and from the capital market? Will banks become more like capital market underwriters and offer passive transaction loans or return to their roots as relationship lending experts? These are the questions we address. Our key result is that as interbank competition increases, banks make more relationship loans, but each has lower added value for borrowers. Capital market competition reduces relationship lending (and bank lending shrinks), but each relationship loan has greater added value for borrowers. In both cases, welfare increases for some borrowers but not necessarily for all.

Date: 2000
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https://doi.org/10.1111/0022-1082.00223

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Working Paper: Can Relationship Banking Survive Competition? (1997)
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Persistent link: https://EconPapers.repec.org/RePEc:bla:jfinan:v:55:y:2000:i:2:p:679-713

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