| Financial Market Competition and Relationship Underwriting of Investment Banks banks |
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Hae Jin Chung, Tae Young Heo |
| 자본시장의 경쟁과 투자은행의 관계형 금융 |
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정혜진, 허태영 |
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| Abstract |
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We examine how the financial market evolves under different degrees of competition if investment banks participate in relationship banking, extending the work of Boot and Thakor (2000). Under moderate competition in the financial market, relationship underwriting of investment banks leads to a decrease in both relationship lending and transactional lending of commercial banks. Moreover, the borrowers that previously raised capital from commercial banks but switched to relationship underwriting of investment banks benefit from their change in financing. As competition becomes severe, commercial banks stop transactional lending and focus on relationship lending only. Under the extreme competition, the fixed costs born by commercial banks on their deposits become too expensive for commercial banks to survive, so only transactional underwriting and relationship underwriting of investment banks are viable in the financial market. The predictions of our model have policy implications for the regulations in the financial market in the era of blurring boundaries between commercial banks and investment banks. |
| Key Words:
경쟁,관계형 금융,관계형 인수,자본시장,투자은행,Capital Market,Competition,Investment Banking,Relationship Banking,Relationship Underwriting |
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