This paper presents a theoretical analysis of strategic competition in retail banking when some of the ®rms show expense preference behavior. The literature on expense preference behavior by banking ®rms is fairly large, but to our knowledge, so far, the strategic interaction between pro®t maximizing banks and banks with expense preference behavior has not been investigated. The paper has also ...

The paper surveys theories of the intertemporal allocation of funds through demand deposits and anonymous markets, ...rst separately and then in an integrated model. It reviews some work on the role of market frictions and asset characteristics, and suggests that the interplay between these two is crucial in explaining the observed coexistence of demand deposits and anonymous markets. JEL class...

This article explains why the collective determination of interchange fees in payment platforms and in ATM networks can lead to ine¢ ciencies in the substitution between payment cards and cash. If the issuers are ATM owners, I show that the pro…t maximising interchange fees re‡ect the trade-o¤ that banks make between the pro…ts on foreign withdrawals and the possibility to save the costs of cas...

Margins in international banking have fallen dramatically during the last years. Therefore, banks face the pressing need to develop more suitable forms of organization and more efficient incentive schemes. In a principal agent framework this paper develops four fundamental rules. The marginal benefits from additional risk taking should be equal to its marginal cost. The top management should se...

This paper investigates how financial weakness among Japanese banks in the second half of the 1990s was reflected in pricing in the financial markets. Two indicators, the Japan premium (JP) and the stock price spread (SP)}deviation between the bank stock index (BINDEX) and stock price index excluding banks (NINDEX)}were examined. The structural change occurring in the relationship between BINDE...

This study examines how the level of financial development in a community affects households’ decisions over how remittance income is spent. My findings suggest that in communities without banks remittances are more likely to be used for productive investments or to purchase assets. Increasing the size of the financial sector in communities with banks present increases the likelihood that remit...

The main purpose of this paper is to present the empirical findings derived from the data of small firms that the availability of private and public information on the borrowing firm leads to diverse borrowing patterns among firms. Exploring logit models to characterize the firm’s choice of a financial source, we find that firms whose information is poorly recorded, or who are publicly less rec...

We provide the first evidence that changes in risk-based capital requirements for banks affect the real economy through international trade. Using a natural experiment – mandatory Basel II adoption in its Standardized Approach by all banks in Turkey on July 1, 2012 – we investigate the impact of new risk-weights applied to commercial letters of credit (CLC) on that country’s exports to 174 coun...

Relationship lending is a common practice in credit financing all over the world, particularly in Germany. On the basis of a comprehensive data set comprising information on firm-bank relationships for more than 16,000 observations, this study analyses the determinants of relationship lending in Germany. We find that small, young and R&D-intensive firms tend to choose relationship lending. Furt...

Using a database from post-communist, pre-deposit-insurance Russia, we demonstrate the presence of quantity-based sanctioning of weaker banks by both firms and households, particularly after the financial crisis of 1998. Evidence for the standard form of price discipline, however, is notably weak. Estimating the deposit supply function, we show that, particularly for poorly capitalized banks, i...