Bank Competition, Borrower Competition and Interest Rates

Carlos Bellon

IC3JM - Estudios = Working Papers from Instituto Mixto Carlos III - Juan March de Ciencias Sociales (IC3JM)

Abstract: The effect bank competition has on interest rates should depend on the fact that borrowers compete against each other. The borrowing rate of a firm affects its ability to compete in the industrial marketplace, and ultimately, its ability to repay its loans. Thus, competition amongst borrowers acts as a limit to the amount of rents financial oligopolists can extract. I find evidence that firms that operate within areas of limited bank competition face higher rates than their peers. I also identify an innovative control group that can be used in tests of bank market structure.

Keywords: Bank; competition; Small; business; lending (search for similar items in EconPapers)
JEL-codes: D43 E43 G21 (search for similar items in EconPapers)
Date: 2014-06-16
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Persistent link: https://EconPapers.repec.org/RePEc:cte:imrepe:id-14-03

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