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Branching, lending and competition in Italian banking

Branching, lending and competition in Italian banking
Branching, lending and competition in Italian banking
With the liberalization of legal barriers to bank branching in the early 1990s, both market structure and competitive conditions in Italy changed profoundly as banks expanded their branching networks. This paper provides novel empirical evidence on how changes of the branch network structure at the province level affect the performance and lending activity of banks across the period 1993-2011. In particular, we adopt two modes of analysis. The first focuses on the impact of diversification strategies at the province level on performance, lending and funding strategies. While the second one examines how the increase of big banks’ local presence affects single-market bank performance and lending strategies. Our results show that geographical diversification strategies can reduce performance, the adjusted Lerner Index of banks and lending activities, but increase the Lerner Index in deposit markets. Furthermore, we find that the expansion of branches by large-medium sized banks in concentrated markets can reduce the Lerner Index for the deposit market and the amount of loans offered by single-market banks.
Branching, Market structure, Banking, Competition
1351-847X
208-230
Degl'innocenti, Marta
e33b2a74-a534-44a2-ab66-819b156564c3
Mishra, Tapas
218ef618-6b3e-471b-a686-15460da145e0
Wolfe, Simon
9a2367fc-36cc-496a-bbd2-e7346bcbb19e
Degl'innocenti, Marta
e33b2a74-a534-44a2-ab66-819b156564c3
Mishra, Tapas
218ef618-6b3e-471b-a686-15460da145e0
Wolfe, Simon
9a2367fc-36cc-496a-bbd2-e7346bcbb19e

Degl'innocenti, Marta, Mishra, Tapas and Wolfe, Simon (2018) Branching, lending and competition in Italian banking. European Journal of Finance, 24 (3), 208-230. (doi:10.1080/1351847X.2017.1303526).

Record type: Article

Abstract

With the liberalization of legal barriers to bank branching in the early 1990s, both market structure and competitive conditions in Italy changed profoundly as banks expanded their branching networks. This paper provides novel empirical evidence on how changes of the branch network structure at the province level affect the performance and lending activity of banks across the period 1993-2011. In particular, we adopt two modes of analysis. The first focuses on the impact of diversification strategies at the province level on performance, lending and funding strategies. While the second one examines how the increase of big banks’ local presence affects single-market bank performance and lending strategies. Our results show that geographical diversification strategies can reduce performance, the adjusted Lerner Index of banks and lending activities, but increase the Lerner Index in deposit markets. Furthermore, we find that the expansion of branches by large-medium sized banks in concentrated markets can reduce the Lerner Index for the deposit market and the amount of loans offered by single-market banks.

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Branching, lending and competition in Italian banking-M Degl'innocenti - Accepted Manuscript
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Accepted/In Press date: 1 March 2017
e-pub ahead of print date: 29 March 2017
Published date: 11 February 2018
Keywords: Branching, Market structure, Banking, Competition
Organisations: Banking & Finance

Identifiers

Local EPrints ID: 406653
URI: http://eprints.soton.ac.uk/id/eprint/406653
ISSN: 1351-847X
PURE UUID: 58a4f45c-4f6b-4f4c-8b50-30b10f602b35
ORCID for Tapas Mishra: ORCID iD orcid.org/0000-0002-6902-2326
ORCID for Simon Wolfe: ORCID iD orcid.org/0000-0001-9815-9535

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Date deposited: 18 Mar 2017 02:27
Last modified: 16 Mar 2024 05:06

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Contributors

Author: Marta Degl'innocenti
Author: Tapas Mishra ORCID iD
Author: Simon Wolfe ORCID iD

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