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| dc.title | Informational Switching Costs, Bank Competition and the Cost of Finance |
| dc.contributor.author | Haas Ornelas, José Renato |
| dc.contributor.author | Soares da Silva, Marcos |
| dc.contributor.author | Nazar Van Doornik, Bernardus Ferdinandus |
| dc.contributor.orgunit | Department of Research and Chief Economist |
| dc.coverage | Brazil |
| dc.date.available | 2020-07-23T00:00:00 |
| dc.date.issue | 2020-07-23T00:00:00 |
| dc.description.abstract | This paper studies the links between competition in the lending market and spreads of bank loans in Brazil. Evidence from a dataset of more than 13 million loan-level observations from private banks shows a positive relationship between market power, measured by the Lerner index, and the cost of finance, measured by spreads over the treasury curve. Furthermore, there is evidence of the holdup problem, originating from informational switching costs faced by firms. Private banks engage in a strategy of first competing fiercely for clients by offering a lower loan interest rate and later increasing interest rates as the bank-firm relationship duration increases. Both results are stronger for micro and small firms than for medium and large firms. |
| dc.format.extent | 52 |
| dc.identifier.doi | http://dx.doi.org/10.18235/0002508 |
| dc.identifier.url | https://publications.iadb.org/publications/english/document/Informational-Switching-Costs-Bank-Competition-and-the-Cost-of-Finance.pdf |
| dc.language.iso | en |
| dc.medium | Adobe PDF |
| dc.publisher | Inter-American Development Bank |
| dc.subject | Financial Institution |
| dc.subject | Loan Operation |
| dc.subject | Credit Market |
| dc.subject | Interest Rate |
| dc.subject | Commercial Bank |
| dc.subject | Credit Line |
| dc.subject.jelcode | L14 - Transactional Relationships • Contracts and Reputation • Networks |
| dc.subject.jelcode | G21 - Banks • Depository Institutions • Micro Finance Institutions • Mortgages |
| dc.subject.jelcode | L10 - Market Structure, Firm Strategy, and Market Performance: General |
| dc.subject.jelcode | D43 - Oligopoly and Other Forms of Market Imperfection |
| dc.subject.keywords | Banking;Competition;Switching costs;Information asymmetry;Holdupproblem;Lock-in |
| dc.type | Working Papers |
| idb.identifier.pubnumber | IDB-WP-01104 |
| idb.operation | RG-K1089 |