Does Bank Branch Competition Alleviate Household Credit Constraints?Evidence from Korean Household Data

Saeyeon Oh () and Jungsoo Park
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Saeyeon Oh: Department of Economics, Sogang University, Seoul

No 1501, Working Papers from Nam Duck-Woo Economic Research Institute, Sogang University (Former Research Institute for Market Economy)

Abstract: This paper provides empirical evidence on how bank branch competition affects household credit constraints based on Korean household and nation-wide bank branch data. The main findings are as follow. First, regression results show that banks alleviate household credit constraint when bank branch competition is strong. Second, relaxation of credit constraint occurs at the internal margin, while external margin is not affected. Finally, main beneficiaries from increase in banking competition are older households with head age 35 or above. These results are consistent with the fact that most Korean banks are multi-branch nation-wide banks transacting based on hard information. Banks are compelled to provide more household credit in order to compensate for the lower profitability in competitive market.

Keywords: Bank branch competition; credit constraints; information asymmetry (search for similar items in EconPapers)
JEL-codes: E44 G01 G21 (search for similar items in EconPapers)
Pages: 22 pages
Date: 2015
New Economics Papers: this item is included in nep-ban, nep-com and nep-mac
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Persistent link: https://EconPapers.repec.org/RePEc:sgo:wpaper:1501

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