Multimarket Contact and Profitability in Banking: Evidence from Italy

Abstract

Banking, Competition, Multimarket contact, Mutual forbearance, Linked oligopoly, C33, G21, L40,

Multimarket contact in Italian retail banking: Competition and welfare

“…Similarly to Coccorese and Pellecchia (2009), we …nd that banks with an extensive multi-market contacts (at least 19 out of the 20 local markets) tend to be less competitive, pay lower deposit rates and behave as if they were maximizing their pro…t jointly taking into account the competitive fringe of smaller banks. We also estimate the welfare implication of this less than competitive behavior.…”

“…De Bonis and Ferrando (2000) …nd that geographical overlap in banking is positively correlated with changes in market shares and lower lending rates, con…rming the hypothesis of an overall increase in competition within the Italian banking system in the nineties. Coccorese and Pellecchia (2009) …nd that in the period 2002-2005 pro…tability is positively related to the average number of contacts among banks, and appear to be higher for those credit institutions experiencing more links. They conclude that the increasing consolidation (and hence the growing number of interactions in local markets) that has characterized this sector in those years were harmful for consumers and decreased competition in the Italian banking industry.…”

Bad Loans andDe NovoBanks: Evidence From Italy

“…For banks operating in more than one of the Italian regions, the values of LOANRATE , lnHHI , lnPERCAPGDP , GDP_GROWTH and NPL have been weighted according to the geographical distribution of their branches (Maudos, ; Coccorese and Pellecchia, ).…”

Multimarket competition and profitability: evidence from Ukrainian banks

“…The empirical literature in the banking sector provides mixed and inconclusive findings. Several studies argue that a multimarket contact is positively related to banks' profitability (e.g, Whalen, 1996;Pilloff, 1999;Coccorese and Pellecchia, 2009), while other papers (e.g., Rhoades and Heggestad, 1985;De Bonis and Ferrando, 2000) provide limited support for the mutual forbearance nexus. Moreover, Mester (1987) shows that the crossproduct between market concentration and contact is more important than the individual effects.…”