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The objective function of government-controlled banks in a financial crisis

Yoshiaki Ogura ()

Journal of Banking & Finance, 2018, vol. 89, issue C, 78-93

Abstract: We present evidence that government-controlled banks (GCBs) significantly increased their lending to small and medium-sized enterprises (SMEs) whose main bank was a large bank in the 2008–09 financial crisis. Further analyses show that the weak relationship between large banks and SMEs is a major cause for this phenomenon. The mixed Cournot oligopoly model with relationship banking, where profit-maximizing private banks and a welfare-maximizing GCB coexist, shows that this finding is consistent with the welfare maximization by a GCB rather than its own profit maximization.

Keywords: Government-controlled banks; Mixed oligopoly; Relationship banking; Small business financing (search for similar items in EconPapers)
JEL-codes: G21 H44 (search for similar items in EconPapers)
Date: 2018
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Working Paper: The Objective Function of Government-controlled Banks in a Financial Crisis (2016) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:89:y:2018:i:c:p:78-93

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