The changing structure of local credit markets: Are small businesses special?

In many countries consolidation in the banking industry has reduced the number of small banks and led to significant shifts in market shares; deregulation has fostered entry in local credit markets and the expansion of branch networks, increasing competition in local markets. Small businesses are believed to be more vulnerable to these changes, since they are more dependent on credit from local banks. In this paper we investigate the consequences of consolidation and entry for these borrowers compared with those for large firms. We employ a data set for Italy, which provides information on volumes of loans and bad loans by size of borrower with a detailed geographical partition. We find that mergers are followed by a temporary reduction in outstanding credit to all sizes of borrowers and by an increase in bad loans, most likely due to the reassessment of banks portfolios. Entry has a relatively persistent negative impact on credit supply to small and medium-sized firms. Our results also show that concentration, branch density and the share of branches of small banks affect the volumes of credit and bad loans of small borrowers.     

Competition, Adverse Selection, and Information Dispersion in the Banking Industry

Proprietary information generated through the process of lendingcan impact the structure of the banking industry. With morecompeting banks, borrower-specific information becomes moredisperse, as each bank becomes informed about a smaller poolof borrowers. This reduces banks' screening ability, creatingan inefficiency as more low-quality borrowers obtain financing.Incumbent banks' information advantage may also create difficultiesfor potential entrants, so that entry should be easier in marketswith high borrower turnover or where entrants have specificexpertise in evaluating credit risks. We draw implications forwhether financial deregulation is likely to increase borrowers'surplus, and what patterns of entry might be observed.     

Personal Bankruptcy and Credit Market Competition

We document a link between U.S. credit supply and rising personal bankruptcy rates. We exploit the exogenous variation in market contestability brought on by banking deregulation—the relaxation of entry restrictions in the 1980s and 1990s—at the state level. We find deregulation explains at least 10% of the rise in bankruptcy rates. We also find that deregulation leads to increased lending, lower loss rates on loans, and higher lending productivity. Our findings indicate that increased competition prompted banks to adopt sophisticated credit rating technology, allowing for new credit extension to existing and previously excluded households.     

Adverse selection,search costs and sticky credit card rates

Several scholars of financial economics observed that during the 1980s, market interest rates declined continuously with little or no impact on credit card rates. Recently, Meyercord (1994), Sinkey and Nash (1993), and Sullivan and Worden (1995) recorded significant changes in the credit card market indicating an increased level competition. This study represents an attempt to determine the sensitivity of credit card rates to the costs of funds in the U.S. economy. The evidence from the Johansen Cointegration test confirms that credit card rates and cost of funds posses a long-run equilibrium relationship with one another. Furthermore, the results of the error correction models are indicative of a sluggish rate at which credit card interest rates adjust to the costs of funds. Between 1982 and 1994, credit card rates adjust to changes in the cost of funds at about 15 percent per quarter. These results represent anecdotal evidence for the validity of adverse selection, search and switch costs explanation that have been discussed in the financial contracting literature.     

Regulate one service,tame the entire market: Credit cards in Turkey

In credit card markets banks provide both payment and credit services. Two regulations were recently enacted in the Turkish credit card market: one on payment services in 2005 and the other on credit services in 2006. By employing the well-known  and  method and a unique quarterly data set for 21 Turkish banks between 2002 and 2008, we investigate the extent of banks’ market power in the Turkish credit card market before and after the regulations. Unlike most of the existing literature, which considers competition and regulation for either credit or payment services and ignores the externalities between them, we consider the entire market by taking both services into account. Fixed effects estimations reveal that banks enjoyed collusive oligopoly power before the regulations. Although the first regulation did not have much impact, the second led to rises in both banks’ total revenues and competition in the entire market.     

信用卡使用意向成因分析及其营销策略研究

本文在计划行为理论的基础上,使用结构方程模型等数理统计方法,探析了消费者信用卡使用意向的影响因素,进而建构了消费者信用卡使用意向模型。研究表明,计划行为理论中信用卡态度和知觉行为控制变量对消费者信用卡使用意向有重要影响。此外,研究还进一步将消费者信用卡态度区分为便利性态度、金钱与信用态度,实证研究显示便利性态度对信用卡使用意向有重要影响,这种区分是合理的和必要的。最后,研究提出实务建议,为中国信用卡业务的完善和发展提供决策依据。     

Entry Decisions and Adverse Selection: An Empirical Analysis of Local Credit Markets

During the last decades there has been a widespread relaxation of legal entry barriers into the banking industry, with potential benefits for financial integration and competition. Obstacles to banks geographical and business expansion have been removed and branching has been substantially liberalized. This paper analyses the determinants of entry decisions into local credit markets using a unique data set before and after deregulation of the Italian banking industry. We estimate an entry model à la Poisson and find evidence that spreads between loan and deposit rates drive entry only for newly chartered banks, but does not affect the decision to open branches of banks operating in other markets. Branching by outside banks is instead positively correlated with business opportunities in the provision of financial services which do not require the acquisition of substantial proprietary information. Both these results are consistent with the hypothesis that in credit markets incumbents have an informational advantage over new entrants.     

Banking deregulation and credit risk: Evidence from the EU

This paper studies the effect of banking deregulation on credit risk. Its theoretical model shows that a bank is willing to invest more resources in screening borrowers when there is an entry threat, even though loan rates are driven lower. Thus, deregulation may result in improved loan quality and lower credit risk. This result is tested using bank-level balance sheet data and macroeconomic data for the European Union. The data reveal that competition intensified after the completion of the Second Banking Directive, while loan quality improved in most markets. Evidence is found that the loan quality improvement is associated with lower interest margin.     

Foreclosure Delay and Consumer Credit Performance

The deep housing market recession from 2008 through 2010 was characterized by a steep rise in number of foreclosures. The average length of time from onset of delinquency through the end of the foreclosure process also expanded dramatically. Although most individuals undergoing foreclosure were experiencing serious financial stress, the extended foreclosure timelines enabled them to live in their homes without making mortgage payments until the end of the foreclosure process, thus providing temporary income and liquidity benefits from lower housing costs. This paper investigates the impact of extended foreclosure timelines on borrower performance with credit card debt. Our results indicate that a longer period of nonpayment of mortgage expenses results in higher cure rates on delinquent credit cards and reduced credit card balances. Thus, foreclosure process delays may have mitigated the impact of the economic downturn on credit card default—suggesting that improvement in credit card performance during the post-crisis period would likely be slowed by the removal of the temporary liquidity benefits as foreclosures reach completion.     

Acquisition,affinity and rewards: Do they stay or do they go?

Customer relationship management seeks to understand how to generate profitable customers who enter into a long-term relationship with a firm. In this paper, we examine the role of modes of acquisition and retention programmes on customer lifetime in the context of a credit card issuing bank. While other papers have studied retention programmes such as loyalty card and reward card, there is no published study in the credit card context. Using a rich data set on nearly 5,000 customers observed over a three-year period, we are able to provide detailed insights about the efficacy of these strategies. We show that affinity cards customers and customers acquired through direct mail have longer lifetimes. We also find that reward card programmes generate customers with a shorter lifetime. Finally we re-examine the link between long-life customers and profitability and find that the relationship is weak, consistent with recent findings.     

对个体工商户受理信用卡业务制约因素的探析

为防止恶意套现,2009年8月央行出台了有关加强银行卡安全的文件,明确规定严格收单结算账户管理,禁止将特约商户（含固定电话支付业务的特约商户）的个人结算账户设置为信用卡收单账户。本文在对克拉玛依地区银行卡推广使用情况调查的基础上,阐释了关闭信用卡受理功能后对市民、商户造成的不利影响,分析了转开单位结算账户受理信用卡存在的成本较大、手续烦琐,且现金流动不便的问题,并提出了相关对策建议。     

Deregulation,technological change,and the business-lending performance of large and small banks

According to DeYoung et al. [Journal of Financial Services Research, 2004] deregulation and technological change has divided the US banking industry into two primary size-based groups: very large banks, specializing in the use of “hard” information to make standardized loans and smaller banks, specializing in the use of “soft” information and relationship development to make non-standardized loans. We evaluate business-lending performance for small and large banks over the 1993–2001 period. Small business lending by small banks is characterized by relationship development and non-standardized loans. Consistent with DeYoung et al.'s model, we find that, after controlling for market concentration, cost of funds, and a variety of other factors that might influence yields, smaller banks perform better than larger banks in the small business lending market. However, larger banks appear to have the advantage in credit card lending, a market characterized by impersonal relationships and standardized loans. Interestingly, we find evidence that larger banks have been making inroads in the market for the smallest business loans, a result consistent with the use of credit scoring by large banks to make very small business loans [Berger et al., Journal of Money, Credit, and Banking, 2004].     

Bank deregulation and corporate risk

Although research shows that competitive banks spur corporate growth, less is known about the impact of bank competition on corporate risk. Using a sample of more than 70,000 firm-year observations covering the period from 1975 through 1994, we find that deregulation that intensified competition among banks materially reduced corporate risk, especially among firms that rely heavily on bank finance. We find that competition-enhancing bank deregulation reduced corporate volatility by easing credit constraints when firms experience adverse shocks and reducing the procyclicality of borrowing.     

Credit cycle coherence in the eurozone: Was there a euro effect?

This paper examines effects of the euro introduction on credit cycle coherence in the eurozone through six channels. We construct and describe credit cycles for total bank credit, household mortgages and non-financial business loans for 16 EMU economies over 1990–2015. Credit cycle coherence is measured by synchronicity of cycle movements and similarity of their amplitudes. We find that the effect of euro introduction runs through elimination of currency risk and higher capital flows, which decrease coherence of total credit and mortgage credit cycles, but increase coherence of business credit cycles. Falling interest rates contribute to the convergence of total and mortgage credit cycles. Financial deregulation and legal harmonization are associated with lower coherence of all credit cycles, while trade openness has the opposite impact. The findings impinge on monetary policy effectiveness in the eurozone, with implications for macroprudential policy.     

The cost of being late? The case of credit card penalty fees

This paper is the first in the literature to examine the determinants of US credit card penalty fees. Many critics of credit card fees – including a number of US Senators – have argued that credit card penalty fees reflect banks’ market share. Using a unique data set we find that fees are increasing in customer risk which supports the position of defenders of penalty fees, such as banks. However, our finding that fees are increasing in a bank's market share is consistent with the concerns expressed by politicians and regulators. We also find card penalty fees are direct substitutes for card interest rates.     

银行业竞争、创新资源配置和企业创新产出——基于中国工业企业的经验证据

本文利用城市级商业银行分支机构数据,结合中国工业企业数据和企业专利数据,实证分析银行业竞争对中国企业创新产出的影响。研究发现,竞争性的银行业市场结构显著促进了企业创新产出,对非国有企业和中小企业尤为显著。进一步地,本文基于资源配置角度,从新进入企业和在位企业双重视角探讨银行业竞争影响企业创新产出的作用途径。检验发现,银行业竞争提高条件下,更多的高效率企业进入创新部门,更多的高效率在位企业增加创新投入,且上述影响在非国有企业和中小企业中更为明显。本文检验结果显示,银行业竞争能提高银行对高效率企业的信贷支持,优化企业之间创新资源配置,并通过引导高效率非国有企业和中小企业增加创新投入而推动整体层面的创新产出。本文拓展了银行业竞争对企业创新的微观影响研究,为制定基于创新驱动的金融发展政策提供新思路。     

信用卡、风险应对与城镇家庭股市参与

信用卡市场的发展有利于家庭平滑消费,但是否会影响家庭的投资决策尚缺少事实检验。基于中国家庭金融调查(CHFS)2011和2013年的调查数据,本文首次检验了信用卡对城镇家庭股市投资的影响。研究发现:(1)控制家庭财富、融资渠道、社会资本等特征,持有信用卡在边际上促进了家庭的股市参与率,股市投资额取决于信用额度。(2)中国信用卡市场的发展,并未像流动性约束理论预测的可以平滑消费,反而刺激了家庭风险性资产的配置,最终提高了储蓄率。原因在于,中国家庭更多地将信用卡作为应对未来短期突发性风险的金融工具,从而在当期将更多资产配置在风险资产上,以实现资本积累。使用信用卡数目、信用额度等多种衡量方式,并采用工具变量法(IV)和面板数据固定效应模型等解决内生性问题后,该结论稳健。该研究有助于理解信用卡在中国家庭投资决策的作用,并为流动性约束或有限股市参与假说提供中国经验。     

Debit or credit?

Empirical consumer payment price sensitivity has implications for theory, optimal regulation of payment card networks, and business strategy. A critical margin is the price of a credit card charge. A revolver who did not pay her most recent balance in full pays interest; other credit card users do not. I find that revolvers are substantially less likely to incur credit card charges and substantially more likely to use a debit card, conditional on several proxies for transaction demand and tastes. Debit use also increases with credit limit constraints and decreases with credit card possession. Additional results suggest that debit is becoming a stronger substitute for credit over time.     

Banking deregulation,macroeconomic dynamics and monetary policy

We assess the effects of increased bank competition on macroeconomic and lending dynamics and on the transmission of monetary policy. Applying panel local projections to state-level data, we, in a first step, investigate the dynamic effects of fiercer bank competition induced by deregulation allowing geographical expansion of banks across state borders in the 1980s and early-1990s. We allow for possible adjustments before the new laws became effective due to potential anticipation effects. Our findings suggest that these events were anticipated and that they temporarily increased economic activity as well as business and consumer lending. We also find a permanent increase in real estate lending and house prices. In a second step, we show that the impact of monetary policy on economic activity, house prices and lending tended to become stronger after interstate banking deregulation.     

Credit card ownership and usage behaviour in Saudi Arabia: The impact of demographics and attitudes toward debt

Because of the Islamic prohibition of interest, in Saudi Arabia, there has long been a debate about the acceptability of owning and using credit cards. Available industry statistics, however, suggest that card ownership and usage may be on the rise. In this study, we empirically examine the extent and nature of credit card ownership and usage in the country, and how these are impacted by consumer demographics and attitudes toward debt. Using data from a structured survey, we find inter alia that credit card penetration in the country is relatively low, female Saudis are more likely than males to own the cards, card usage tends to be selective, attitude toward debt is a significant determinant of card ownership but not usage behaviour, and evaluation of card attributes is fairly positive among cardholders. Theoretical, managerial, and public policy implications of the findings are discussed.