An Analysis Of The Relationship Between Bank Competition And Relationship Lending

Relationship lending technology plays an important role in the conversion of savings into investment in financial intermediaries.For bank intermediaries,investing in private information and developing relational loans that can improve information asymmetry issues such as adverse selection and moral hazard,would reduce loan risk and ease credit rations.For enterprises,the establishment of a stable relationship with the banks can reduce the degree of opacity of enterprises(especially small and medium enterprises),and the loan mortgage requirements,thereby improve the enterprise credit availability.As the decreasing financial control in China and the increasing competition among banks,the impact of bank competition on relational loans is more and more concerned by the theoretical and regulatory authorities.For the current China,the effect of relaxing the banking industry access to slow down the financing difficulties of SMEs mainly depends on the impact of China's inter-bank competition on the relationship between loans.This paper extends the model of Yafeh&Yosha(2001),uses the static analysis,comparative static analysis and strategic selection analysis method to study the impact of banking competition on relationship lending.Our conclusions are as follows:At first,bank competition and relationship lending are negatively related in markets with better lending infrastructure environment.Secondly,bank competition and relationship lending is inverted U-shaped correlated in markets with worse lending infrastructure environment.This difference is mainly caused by the different impact of lending infrastructure environment base on the relationship investment costs of bank in the market.In the empirical research,this paper chooses the relevant panel data of private industrial enterprises in China from 2005 to 2012,and analyzes the factors such as financial development level,economic development level and legal system.The results support the above theoretical conclusions.Based on the conclusion of the study,this paper suggests that when the government improve the financing problem of the small and medium-sized enterprises in China by changing the competition level of the banking industry,it is necessary to combine the actual development level of each region and control the degree of bank competition in the short term,and can not increase the bank competition blindly.In the long run,it should create a good corporate information environment,cultivate good social credit,standardize the development of small and medium banks legal norms to strengthen China's loan infrastructure.