Bank market structure, competition, and SME financing relationships in European regions

Steve Mercieca, Klaus Schaeck, Simon Wolfe*

*Corresponding author for this work

Research output: Contribution to journalArticle (Academic Journal)

31 Citations (Scopus)

Abstract

How do concentration and competition in the European banking sector affect lending relationships between small and medium sized enterprises (SMEs) and their banks? Recent empirical evidence suggests that concentration and competition capture different characteristics of banking systems. Using a unique dataset on SMEs for selected European regions, we empirically investigate the impact of increasing concentration and competition on the number of lending relationships maintained by SMEs. We find that competition has a positive effect on the number of lending relationships, weak evidence that concentration reduces the number of banking relationships and weak persistent evidence that they tend to offset each other.

Original languageEnglish
Pages (from-to)137-155
Number of pages19
JournalJournal of Financial Services Research
Volume36
Issue number2
DOIs
Publication statusPublished - Oct 2009

Keywords

  • Bank market structure
  • Relationship banking
  • SME financing

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