Intra-competitiveness and inter-competitiveness among mutual banks: the case of Trento

Is competition among cooperative banks a negative sum game?

“…Instead, we have inner competition when a BCC competes with one or more other BCCs. Barbetta et al (2016) provide empirical evidence supporting the hypothesis that outer competition has positive effects on BCCs while inner competition delivers negative consequences on these mutual banks. Specifically, studying the BCCs operating in the province of Trento (North-Eastern Italy) they find that: i) 'loans to deposits' and 'loans to total assets' ratios are significantly higher for BCCs that do not compete with each other, but only with non-mutual banks, and ii) 'bad loans to total loans' ratios are significantly lower for the same group of banks.…”

“…In turn, Coccorese et al (2016) address analogous issues but on data for the whole of Italy. They show that: a) branch productivity is negatively affected moving from a BCC monopoly to a BCC duopoly, b) branch productivity is negatively affected moving from 'outer' competition only to both 'inner ' and 'outer' competition. The signals that inner competition is problematic for BCCs are clear enough from Barbetta et al (2016) and Coccorese et al (2016). However, both papers fail to explain the channels through which inner competition deteriorates performance and are therefore unsatisfactory in two main respects.…”

“…In this respect, we can consider three main strategic outcomes for the competitive attack by the aggressor BCC: i) it succeeds and the incumbent BCC is pushed out of the market, ii) it is unsuccessful with only the aggressor BCC suffering a worsened performance, and iii) it is unsuccessful with both the aggressor BCC and the incumbent BCC suffering lower performance. In the first case, the damage to performance detected by Barbetta et al (2016) and Coccorese et al (2016) is only temporary and would simply tell that the aggressor BCC is competing out the incumbent BCC. Over time, the latter would be pushed out of the market and the aggressor would then recover higher performance.…”

Bank Performance, Financial Stability and Market Concentration: Evidence From Cooperative and Non‐cooperative Banks

“…13 As already specified in Section 5.3, in order to measure the level of market concentration, we rely on a market concentration index in terms of total loans. More specifically, we calculate the sum of square market shares of all banks in the same labour market areas, being those banks both cooperative and non-cooperative 13 Barbetta et al (2016) and Coccorese et al (2016) provide empirical evidence supporting the hypothesis that outer competition has positive effects on cooperative banks' performances while inner competition delivers negative consequences on these mutual banks. banks.…”

“…Barbetta et al. () and Coccorese et al. () provide empirical evidence supporting the hypothesis that outer competition has positive effects on cooperative banks’ performances while inner competition delivers negative consequences on these mutual banks.…”