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Interlocking Directorates and Competition in Banking

Author

Listed:
  • Guglielmo Barone

    (University of Padua)

  • Fabiano Schivardi

    (Luiss University, EIEF)

  • Enrico Sette

    (Bank of Italy)

Abstract

We study the effects on loan rates of a quasi-experimental change in the Italian legislation which forbids interlocking directorates between banks. We use a difference-in-differences approach and exploit multiple banking relationships to control for unobserved heterogeneity. We find that the reform decreased rates charged by previously interlocked banks to common customers by between 10-30 basis points. The effect is stronger if the firm had a weaker bargaining power vis-a-vis the interlocked banks. Consistent with the assumption that interlocking directorates facilitate collusion, interest rates on loans from interlocked banks become more dispersed after the reform.

Suggested Citation

  • Guglielmo Barone & Fabiano Schivardi & Enrico Sette, 2020. "Interlocking Directorates and Competition in Banking," EIEF Working Papers Series 2011, Einaudi Institute for Economics and Finance (EIEF), revised May 2020.
    • Handle: RePEc:eie:wpaper:2011
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    More about this item

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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