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| Author: | Matthey, A. |
| Title: | Do public banks have a competitive advantage? |
| Journal: | European Journal of Finance
2010 : JAN/FEB, VOL. 16:1-2, p. 45-55 |
| Index terms: | banks competitive advantage public sector private sector guarantees models |
| Language: | eng |
| Abstract: | Public (henceforth as: pbl.) banks and private (herein as: prv.) banks tend to differ i. in their funding costs and also ii. in the way of dealing with borrowers in financial distress. Based on this paper's model, it is shown that if banks differ in these two characteristics, a separation of borrowers may result, with pbl. banks lending to risky firms and prv. banks lending to safe firms. This feature can explain differences in the lending behaviour and performance of pbl. and prv. banks as found in the market. In addition, the separation may exist even with equal funding costs. This implies that a state guarantee abolition will not necessarily lead to identical performance of the pbl. and prv. banks. |
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