Three essays on relationships and imperfect competition in corporate banking industry.

摘要

This dissertation consists of three inter-related essays. The first essay empirically examines how bank-firm relationships affect post-deregulation competition among underwriting banks in the U.S. corporate bond underwriting market. I find that there is a trade-off between relationships and price in the demand equation and that this trade-off is sharply higher for junk bond issuers and first-time issuers. This finding is consistent with the certification effect of commercial bank underwriting. Commercial bank entry has increased competition in this market to the extent that their client-specific relationship capital has increased product differentiation in the market. Furthermore, since issuers with low reputation value the relationships more, the competitive effect of the deregulation has been most dramatic in these segments.The second essay addresses the question of whether existing institutional differences in banking systems affect bank competition in capital markets. Post-deregulation competition between entrant commercial banks and incumbent investment banks in the Japanese corporate bond underwriting market is empirically analyzed and compared with the results of the U.S. study. I find that the certification effect alone cannot explain both the differences and similarities in the results. Drawing from the comparative banking literature, I interpret these findings as coming from the presence of "betrayal cost" in Japan and its absence in the U.S. These differences in the economic roles of relationships, as shaped by differences in the history of banking and corporate financing institutions, appear to persist in bank competition in the deregulated market.The final essay investigates the paradox that corporate bond markets have grown in the U.S. and Japan as they moved toward universal banking, while the corporate bond market has remained small and underdeveloped in Germany, the country most representative of the universal banking system. Bank competition analysis in a simple model framework shows that a universal banking system that precludes the existence of stand-alone investment banks might prevent the development of corporate bond markets. Thus, in countries where a universal banking system has always been in place, capital markets for firm financing may not develop unless there are opportunities for profitable entry by intermediaries other than existing universal banks.