Endogenous product differentiation in credit markets: What do borrowers pay for? |
| |
| Affiliation: | 1. Department of Economics, University of Haifa, Mount Carmel, Haifa 31905, Israel;2. Norwegian School of Economics and Business Administration, Helleveien 30, N-5045 Bergen, Norway;3. Norges Bank (The Central Bank of Norway), C51, Box 1179, Sentrum, N-0107 Oslo, Norway;1. University of Sheffield, Department of Civil and Structural Engineering, Mappin Street, Sheffield S1 3JD, United Kingdom;2. University of Sheffield, Department of Mechanical Engineering, Mappin Street, Sheffield S1 3JD, United Kingdom;1. International Training Institute for Materials Science (ITIMS), Hanoi University of Science and Technology (HUST), No.1 Dai Co Viet, Hanoi, Vietnam;2. Advanced Institute of Science and Technology (AIST), Hanoi University of Science and Technology (HUST), No.1 Dai Co Viet, Hanoi, Vietnam;3. University of Transportation and Communication, No. 3 Cau Giay, Hanoi, Vietnam;4. Vietnam-Japan International Institute for Science of Technology (VJIIST), Hanoi University of Science and Technology (HUST), No.1 Dai Co Viet, Hanoi, Vietnam |
| |
| Abstract: | This paper studies strategies pursued by banks in order to differentiate their services and soften competition. More specifically we analyze whether bank's ability to avoid losses, its capital ratio, or bank size can be used as strategic variables to make banks different and increase the interest rates banks can charge their borrowers in equilibrium. Using a panel of data covering Norwegian banks between 1993 and 1998 we find empirical support that the ability to avoid losses, measured by the ratio of loss provisions, may act as such a strategic variable. A likely interpretation is that borrowers use high-quality low-loss banks to signal their creditworthiness to other stakeholders. This supports the hypothesis that high-quality banks serve as certifiers for their borrowers. Furthermore, this suggests that not only lenders and supervisors but also borrowers may discipline banks to avoid losses. |
| |
| Keywords: | |
| 本文献已被 ScienceDirect 等数据库收录！ |
|
