Journal of Financial Services Research

, Volume 36, Issue 2, pp 137-155

First online:

Bank Market Structure, Competition, and SME Financing Relationships in European Regions

  • Steve MerciecaAffiliated withSchool of Management, University of Southampton
  • , Klaus SchaeckAffiliated withBangor Business School, Hen Goleg
  • , Simon WolfeAffiliated withSchool of Management, University of Southampton Email author 

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How do concentration and competition in the European banking sector affect lending relationships between small and medium sized enterprises (SMEs) and their banks? Recent empirical evidence suggests that concentration and competition capture different characteristics of banking systems. Using a unique dataset on SMEs for selected European regions, we empirically investigate the impact of increasing concentration and competition on the number of lending relationships maintained by SMEs. We find that competition has a positive effect on the number of lending relationships, weak evidence that concentration reduces the number of banking relationships and weak persistent evidence that they tend to offset each other.


SME financing Relationship banking Bank market structure

JEL Classification

G20 G21 G28