The Effects of Competition in Consumer Credit Market

Stefan Gissler, Rodney Ramcharan and Edison Yu

No 26183, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper finds that banks and non-banks respond differently to increased competition in consumer credit markets. Increased competition and the greater threat of failure induces banks to specialize more in relationship business lending, and surviving banks are more profitable. However, non-banks change their credit policy when faced with more competition and expand credit to riskier borrowers at the extensive margin, resulting in higher default rates. These results show how the effects of competition depend on the form of intermediation. They also suggest that increased competition can cause credit risk to migrate outside the traditional supervisory umbrella.

JEL-codes: D12 G21 G23 (search for similar items in EconPapers)
Date: 2019-08
New Economics Papers: this item is included in nep-ban, nep-cba and nep-com
Note: CF
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Citations: View citations in EconPapers (5)

Published as Stefan Gissler & Rodney Ramcharan & Edison Yu & Philip Strahan, 2020. "The Effects of Competition in Consumer Credit Markets," The Review of Financial Studies, vol 33(11), pages 5378-5415.

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Related works:
Journal Article: The Effects of Competition in Consumer Credit Markets (2020)
Working Paper: The Effects of Competition in Consumer Credit Markets (2018)
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