Competition and agency problems within banks: Evidence from insider lending

Mattia Girotti and Salvad Federica

Working papers from Banque de France

Abstract: This paper studies whether greater competition can mitigate agency problems within banks. We measure the intensity of the agency conflict within a bank by the volume of loans that the bank lends to its insiders (e.g., executives). We first check that these loans are a form of private benefit. By exploiting interstate branching deregulation, we then show that banks react to greater competition by reducing insider lending, especially when the entry of new competitors may more strongly affect bank profitability. Results are robust to using various identification approaches and alternative indicators of agency conflict. We conclude that competitive pressure reduces managerial self-dealing.

Keywords: Banks; Agency Problems; Private Benefits; Competition; Insider Loans (search for similar items in EconPapers)
JEL-codes: G21 G28 G38 (search for similar items in EconPapers)
Pages: 62 pages
Date: 2021
New Economics Papers: this item is included in nep-ban, nep-cfn and nep-cwa
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Competition and Agency Problems Within Banks: Evidence from Insider Lending (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:bfr:banfra:831

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