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Branching, lending and competition in Italian banking

Author

Listed:
  • Marta Degl’Innocenti
  • Tapas Mishra
  • Simon Wolfe

Abstract

With the liberalization of legal barriers to the opening of bank branches in 1990, 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 on performance, lending and funding strategies at the province level. 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.

Suggested Citation

  • Marta Degl’Innocenti & Tapas Mishra & Simon Wolfe, 2018. "Branching, lending and competition in Italian banking," The European Journal of Finance, Taylor & Francis Journals, vol. 24(3), pages 208-230, February.
    • Handle: RePEc:taf:eurjfi:v:24:y:2018:i:3:p:208-230
    DOI: 10.1080/1351847X.2017.1303526
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    Citations

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    Cited by:

    1. Silva, Thiago & Souza, Sérgio & Guerra, Solange & Tabak, Benjamin, 2022. "Decentralized Market Power in Credit Markets," MPRA Paper 114766, University Library of Munich, Germany.
    2. Paolo Coccorese & Laura Santucci, 2020. "Banking Competition and Bank Size: Some Evidence from Italy," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 44(2), pages 278-299, April.
    3. Shaffer, Sherrill & Spierdijk, Laura, 2020. "Measuring multi-product banks’ market power using the Lerner index," Journal of Banking & Finance, Elsevier, vol. 117(C).
    4. Pham, Tho & Talavera, Oleksandr & Tsapin, Andriy, 2022. "Branch network structure, authority and lending behaviour," Economic Systems, Elsevier, vol. 46(4).
    5. Degl’Innocenti, Marta & Fiordelisi, Franco & Trinugroho, Irwan, 2020. "Competition and stability in the credit industry: Banking vs. factoring industries," The British Accounting Review, Elsevier, vol. 52(1).
    6. Sunny Kumar Singh & Chandan Kumar Jha, 2023. "Are financial development and financial stability complements or substitutes in poverty reduction?," The European Journal of Finance, Taylor & Francis Journals, vol. 29(17), pages 2001-2031, November.
    7. Thiago Christiano Silva & Sergio Rubens Stancato de Souza & Solange Maria Guerra, 2021. "COVID-19 and Local Market Power in Credit Markets," Working Papers Series 558, Central Bank of Brazil, Research Department.
    8. Peisen LIU & Houjian LI & Shoujun HUANG, 2018. "Does Bank Concentration Affect Debt Maturity?," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(3), pages 73-87, September.
    9. Thiago Christiano Silva & Sergio Rubens Stancato de Souza & Solange Maria Guerra, 2022. "Covid-19 and market power in local credit markets: the role of digitalization," BIS Working Papers 1017, Bank for International Settlements.
    10. Carmelo Algeri & Luc Anselin & Antonio Fabio Forgione & Carlo Migliardo, 2022. "Spatial dependence in the technical efficiency of local banks," Papers in Regional Science, Wiley Blackwell, vol. 101(3), pages 685-716, June.
    11. Mudeer Ahmed Khattak & Buerhan Saiti, 2021. "Banks' environmental policy and business outcomes: The role of competition," Business Strategy and the Environment, Wiley Blackwell, vol. 30(1), pages 302-317, January.

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