On the Role of Bank Competition for Corporate Finance and Corporate Control in Transition Economies

Monika Schnitzer ()

No 2013, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: Banks play a central role in financing and monitoring firms in transition economies. This study examines how bank competition affects the efficiency of credit allocation; monitoring of firms; and the firms' restructuring effort. In our model, banks compete to finance an investment project with uncertain return. By screening the firm a bank learns about its profitability. Surprisingly, it is found that an increase in bank competition need not reduce a bank's screening incentive even though it lowers its expected profits. Furthermore, competition has a positive impact on the firms restructuring efforts. This suggests a positive role for bank competition in transition economies.

Keywords: Bank Competition; Corporate Finance; Corporate Governance; Restructuring; screening; Transition Economies (search for similar items in EconPapers)
JEL-codes: D43 G21 G34 L13 P31 (search for similar items in EconPapers)
Date: 1998-11
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Related works:
Journal Article: On the Role of Bank Competition for Corporate Finance and Corporate Control in Transition Economies (1999)
Working Paper: On the Role of Bank Competition for Corporate Finance and Corporate Control in Transition Economies (1999)
Working Paper: On the role of bank competition for corporate finance and corporate control in transition economies (1999)
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