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Close competitors? Bilateral bank competition and spatial variation in firms’ access to credit

Author

Listed:
  • Ralph De Haas
  • Liping Lu
  • Steven Ongena
Abstract
We interviewed 379 bank CEOs in 20 emerging markets to identify their banks’ main competitors. We show that banks are more likely to identify another bank as a main competitor in small-business lending when both banks are foreign owned or relationship oriented; when there exists a large spatial overlap in their branch networks and when the potential competitor has fewer hierarchical layers. We then construct a novel bilateral competition measure at the locality level and assess how well it explains geographic variation in firms’ credit constraints. We show that intense bilateral bank competition tightens local credit constraints, especially for small firms, as competition may impede the formation of lending relationships.

Suggested Citation

  • Ralph De Haas & Liping Lu & Steven Ongena, 2023. "Close competitors? Bilateral bank competition and spatial variation in firms’ access to credit," Journal of Economic Geography, Oxford University Press, vol. 23(6), pages 1237-1271.
    • Handle: RePEc:oup:jecgeo:v:23:y:2023:i:6:p:1237-1271.
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    File URL: http://hdl.handle.net/10.1093/jeg/lbad020
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    More about this item

    Keywords

    Bilateral bank competition; geography of banking; small-business lending;
    All these keywords.

    JEL classification:

    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • F65 - International Economics - - Economic Impacts of Globalization - - - Finance
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes
    • R30 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - General
    • R51 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Finance in Urban and Rural Economies

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