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Journal of Economics and Finance

Erschienen in:

03.07.2019

Banking Competition and Bank Size: Some Evidence from Italy

verfasst von: Paolo Coccorese, Laura Santucci

Erschienen in: Journal of Economics and Finance | Ausgabe 2/2020

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Abstract

This paper assesses the degree of competition of the Italian banking industry and investigates whether there are differences in the competitive behaviour related to the size of the intermediaries. Competition is measured using the Bresnahan-Lau model, estimated on a panel dataset of 125 observations over the period 1989-2013. Annual data are collected from the Bank of Italy, and are aggregated into dimensional categories: major, large, medium, small, and minor banks. The results suggest that the sector is rather competitive and that the level of competitiveness has increased over the observed period. Besides, the events occurred in the Nineties seem to have had a structural effect on banks’ market power, as well as the aftermath of the recent financial crisis. The estimates also point out that smaller banks enjoy a higher degree of market power, which is consistent with the relationship lending that characterizes the interaction between banks and borrowers in Italy.

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For further details, see Olivero et al. (2011), Fu et al. (2014), and Coccorese (2017).

Following De Bonis et al. (2012), our definition of State-owned banks includes saving banks, monti di pietà, institutions of public-law, and the banks of national interest (we just skip special credit institutions because they were providers of medium-long term credit).

In order not to lose observations, in the second and third specifications of the time-variant model the last periods are one year longer (2010-2013 and 2011-2013, respectively).

We are aware that the comparison would be more accurate if we use the estimated, rather than the calculated, average cost. Unfortunately, our estimation of the marginal cost does not provide us with all the parameters of the translog total cost function.

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Titel: Banking Competition and Bank Size: Some Evidence from Italy
verfasst von: Paolo Coccorese
Laura Santucci
Publikationsdatum: 03.07.2019
Verlag: Springer US
Erschienen in: Journal of Economics and Finance / Ausgabe 2/2020
Print ISSN: 1055-0925
Elektronische ISSN: 1938-9744
DOI: https://doi.org/10.1007/s12197-019-09488-2

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