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Bank Competition and Regulatory Reform: The Case of the Italian Banking Industry

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Author Info
Paolo Angelini () (Bank of Italy, Economic Research Department)
Nicola Cetorelli (Federal Reserve Bank of Chicago, Research Department)

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Abstract

The paper analyzes the evolution of competitive conditions in the Italian banking industry using firm-level balance sheet data for the period 1983-1997. Regulatory reform, large-scale consolidation, and competitive pressure from other European countries have changed substantially the banking environment, with potentially offsetting effects on the overall degree of competitiveness of the banking market. We find that competitive conditions, relatively unchanged until 1992, have improved substantially thereafter, with estimated mark-ups decreasing over the last five years of the sample period. Also, there is no evidence that banks involved in mergers and acquisitions gained market power; at the same time, however, they exhibit lower than average marginal costs. Finally, after controlling for various factors that may have determined the time pattern of banksÂ’ estimated mark-ups, we still detect a significant unexplained drop in our competitive conditions indicators after 1992. This is consistent with the hypothesis that the introduction of the Single Banking License in 1993 contributed to improve bank competition.

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Paper provided by Bank of Italy, Economic Research Department in its series Temi di discussione (Economic working papers) with number 380.

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Date of creation: Oct 2000
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Handle: RePEc:bdi:wptemi:td_380_00

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Related research
Keywords: bank competition; mergers and acquisitions; Lerner; consolidation;

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Find related papers by JEL classification:
G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Mortgages
G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

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    Other versions:
  20. Vennet, Rudi Vander, 1996. "The effect of mergers and acquisitions on the efficiency and profitability of EC credit institutions," Journal of Banking & Finance, Elsevier, vol. 20(9), pages 1531-1558, November. [Downloadable!] (restricted)
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Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Guiso, Luigi & Sapienza, Paola & Zingales, Luigi, 2006. "The Cost of Banking Regulation," CEPR Discussion Papers 5864, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  2. Luca Dedola & Eugenio Gaiotti & Luca Silipo, 2004. "Money Demand in theEuroArea: Do National Differences Matter?," Macroeconomics 0404019, EconWPA, revised 24 Apr 2004. [Downloadable!]
    Other versions:
  3. Natasa Koutsomanoli & Christos Staikouras, 2004. "Competition and Concentration," Money Macro and Finance (MMF) Research Group Conference 2004 26, Money Macro and Finance Research Group. [Downloadable!]
  4. Nicola Cetorelli & Paolo Angelini, 1999. "Bank competition and regulatory reform: the case of the Italian banking industry," Working Paper Series WP-99-32, Federal Reserve Bank of Chicago. [Downloadable!]
    Other versions:
  5. Federico S. Mandelman, 2006. "Business cycles and monetary regimes in emerging economies: a role for a monopolistic banking sector," Working Paper 2006-17, Federal Reserve Bank of Atlanta. [Downloadable!]
  6. Pasadilla, Gloria & Milo, Melanie S., 2005. "Effect of Liberalization on Banking Competition," Discussion Papers DP 2005-03, Philippine Institute for Development Studies. [Downloadable!]
  7. Francisco Pérez García & Joaquín Maudos Villarroya & Juan Francisco Fernández de Guevara Radoselovics, 2003. "Integration And Competition In The European Financial Markets," Working Papers. Serie EC 2003-12, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie). [Downloadable!]
    Other versions:
  8. Juan Francisco Fernández de Guevara Radoselovics, 2003. "Evolución Del Margen De Intermediación En España: ¿Tipos De Intéres, Riesgo, Costes O Competencia?," Working Papers. Serie EC 2003-05, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie). [Downloadable!]
  9. Dairo Estrada & Sandra Rozo, 2006. "Multimarket spatial competition in the Colombian deposit market," BORRADORES DE ECONOMIA 003264, BANCO DE LA REPÚBLICA. [Downloadable!]
  10. Luca Casolaro & Leonardo Gambacorta & Luigi Guiso, 2005. "Regulation, formal and informal enforcement and the development of the household loan market. Lessons from Italy," Temi di discussione (Economic working papers) 560, Bank of Italy, Economic Research Department. [Downloadable!]
  11. Carol Ann Northcott, 2004. "Competition in Banking: A Review of the Literature," Working Papers 04-24, Bank of Canada. [Downloadable!]
  12. Emilia Bonaccorsi di Patti & Giorgio Gobbi, 2001. "The Effects of Bank Consolidation and Market Entry on Small Business Lending," Temi di discussione (Economic working papers) 404, Bank of Italy, Economic Research Department. [Downloadable!]
  13. Luigi Benfratello & Fabio Schiantarelli & Alessandro Sembenelli, 2006. "Banks and Innovation: Microeconometric Evidence on Italian Firms," IZA Discussion Papers 2032, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  14. Dairo Estrada & Sandra Rozo, . "Multimarket spatial competition in the Colombian deposit market," Borradores de Economia 413, Banco de la Republica de Colombia. [Downloadable!]
  15. Espino, Freddy & Carrera, César, 2006. "Concentración bancaria y margen de las tasas de interés en Perú," Revista Estudios Económicos, Banco Central de Reserva del Perú, issue 13. [Downloadable!]
  16. Federico S. Mandelman, 2006. "Business cycles: a role for imperfect competition in the banking system," Working Paper 2006-21, Federal Reserve Bank of Atlanta. [Downloadable!]
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