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Lending Competition and Relationship Banking: Evidence from Japanese Prefectural Level Data

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  • L11 - Production
  • Pricing
  • And Market Structure
  • Size Distribution Of Firms
  • D82 - Asymmetric And Private Information
  • Mechanism Design
  • G21 - Banks
  • Depository Institutions
  • Micro Finance Institutions
  • Mortgages


The question of whether more competition among banks increases relationship banking, which is predicted to improve credit availability for informationally opaque firms in theory, is a controversial issue in the banking literature. By using firm-level survey data in Japan, this paper provides evidence for the negative correlation between lending competition and the provision of relationship banking . This paper raises the question whether fierce interbank competition is always beneficial for small firms.

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