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The effect on competition of banking sector consolidation following the financial crisis of 2008

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  • Pérez Montes, Carlos

Abstract

Consolidation of the Spanish banking sector after the financial crisis of 2008 raises concerns about potential negative effects on competition. I use structural econometric methods to examine these anti-competitive concerns in the Spanish mortgage market. I estimate a mixed-logit model of mortgage demand and recover bank-level cost information with a strategic model of price competition. Counterfactual experiments reveal that the observed increase in concentration is associated only with small variations in mortgage rates and market shares, staying far from collusive levels. This moderate change in industry conduct implies a small direct effect of consolidation on bank exposures to mortgage risk.

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  • Pérez Montes, Carlos, 2014. "The effect on competition of banking sector consolidation following the financial crisis of 2008," Journal of Banking & Finance, Elsevier, vol. 43(C), pages 124-136.
    • Handle: RePEc:eee:jbfina:v:43:y:2014:i:c:p:124-136
    DOI: 10.1016/j.jbankfin.2014.03.004
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    3. Paolo Coccorese & Giovanni Ferri & Fabiola Spiniello, 2017. "Are mergers among cooperative banks worth a dime? Evidence on post-M&A efficiency in Italy," CERBE Working Papers wpC18, CERBE Center for Relationship Banking and Economics.
    4. Uchino, Taisuke & Uesugi, Iichiro, 2022. "The effects of a megabank merger on firm-Bank relationships and loan availability☆," Journal of the Japanese and International Economies, Elsevier, vol. 63(C).
    5. Li, Shaofang & Marinč, Matej, 2016. "Competition in the clearing and settlement industry," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 40(C), pages 134-162.
    6. Théo Nicolas., 2023. "Bank Market Power and Interest Rate Setting: Why Consolidated Banking Data Matte [Pouvoir de marché des banques et fixation des taux d’intérêt : de l’importance de prendre en compte les données ban," Débats économiques et financiers 40, Banque de France.
    7. Vanesa Llorens & Alfredo Martín-Oliver & Vicente Salas-Fumas, 2020. "Productivity, competition and bank restructuring process," SERIEs: Journal of the Spanish Economic Association, Springer;Spanish Economic Association, vol. 11(3), pages 313-340, September.
    8. Carbó-Valverde, Santiago & Cuadros-Solas, Pedro J. & Rodríguez-Fernández, Francisco, 2021. "The impact of lending relationships on the choice and structure of bond underwriting syndicates," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 74(C).
    9. Coccorese, Paolo & Ferri, Giovanni, 2020. "Are mergers among cooperative banks worth a dime? Evidence on efficiency effects of M&As in Italy," Economic Modelling, Elsevier, vol. 84(C), pages 147-164.
    10. Mirzaei, Ali, 2019. "Market power among UAE banks: The 2008 financial crisis and its impact," The Quarterly Review of Economics and Finance, Elsevier, vol. 71(C), pages 56-66.
    11. Marcos González-Fernández & Carmen González-Velasco, 2019. "An approach to predict Spanish mortgage market activity using Google data," Economics and Business Letters, Oviedo University Press, vol. 8(4), pages 209-214.
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    13. repec:dau:papers:123456789/15030 is not listed on IDEAS
    14. Mary T. Rodgers & James E. Payne, 2020. "Post‐financial crisis changes in financial system structure: An examination of the J.P. Morgan & Co. Syndicates after the 1907 Panic," Review of Financial Economics, John Wiley & Sons, vol. 38(S1), pages 226-241, March.
    15. Avouyi-Dovi, S. & Horny, G. & Sevestre, P., 2017. "The stability of short-term interest rates pass-through in the euro area during the financial market and sovereign debt crises," Journal of Banking & Finance, Elsevier, vol. 79(C), pages 74-94.
    16. Bo Jiang & Hector Tzavellas & Xiaoying Yang, 2022. "Deposit Competition, Interbank Market, and Bank Profit," JRFM, MDPI, vol. 15(5), pages 1-15, April.
    17. Gimeno, Ruth & Andreu, Laura & Sarto, José Luis, 2022. "Fund trading divergence and performance contribution," International Review of Financial Analysis, Elsevier, vol. 83(C).
    18. Li, Yumin & Li, Shiyuan & Li, Guodong & Liu, Minquan, 2020. "Low-Carbon Incentives and the Diffusion for New Energy Vehicles: Evidence from Shanghai," MPRA Paper 110970, University Library of Munich, Germany.

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    More about this item

    Keywords

    Mortgage; Banking Crisis; Sector consolidation; GMM; Mixed-logit; Counterfactual analysis;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G01 - Financial Economics - - General - - - Financial Crises
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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