Theory makes ambiguous predictions about the relationship between market structure and competitiveness of the banking system and banking sector stability. Empirical studies focusing on individual countries provide similarly ambiguous results, while cross-country studies point mostly to a...

We show that competing firms relax overall competition by lowering future barriers to entry. We illustrate our findings in a two-period model with adverse selection where banks strategically commit to disclose borrower information. By doing this, they invite rivals to enter their market....

How do banks react to increased interbank competition? Recent banking theory offers conflicting predictions about the impact of competition on bank orientation - i.e., the choice of relationship based versus transactional banking - and bank industry specialization. We empirically investigate the...