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The Role of the Local Business Environment in Banking Consolidation

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Author Info
Luca Colombo () (DISCE, Università Cattolica)
Gilberto Turati () (DISCE, Università Cattolica)

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Abstract

We study whether local economic conditions in different areas have an impact on the magnitude and direction of the concentration process of a banking industry. By using probit and count data (ZIP) models to study the consolidation of the Italian banking sector in the second half of the 1990s, we document a significant direct impact of the local ‘business environment’ on the concentration of the industry at the regional level. This effect complements the well known indirect effect of macroeconomic characteristics on the profitability and efficiency of banks. We also show that institutional and organizational variables affect the likelihood and number of M&A deals, and help explaining differences in performance. Our results appear to be robust to different specifications, and to a number of robustness checks, including alternative sets of variables defining local ‘business environment conditions’.

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Publisher Info
Paper provided by Università Cattolica del Sacro Cuore, Dipartimenti e Istituti di Scienze Economiche (DISCE) in its series DISCE - Quaderni dell'Istituto di Economia e Finanza with number ief0076.

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Length: nn pages 28
Date of creation: Nov 2007
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Handle: RePEc:ctc:serie3:ief0076

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Web page: http://www.unicatt.it/Istituti/EconomiaFinanza
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Related research
Keywords: Banking M&As; local business environment; profitability; efficiency; credit policies; count data models;

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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
L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure

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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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  13. Rasmusen, Eric, 1988. "Mutual Banks and Stock Banks," Journal of Law & Economics, University of Chicago Press, vol. 31(2), pages 395-421, October.
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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. Maria Flavia Ambrosanio & Massimo Bordignon & Floriana Cerniglia, 2008. "Constitutional reforms, fiscal decentralization and regional fiscal flows in Italy," DISCE - Quaderni dell'Istituto di Economia e Finanza ief0084, Università Cattolica del Sacro Cuore, Dipartimenti e Istituti di Scienze Economiche (DISCE). [Downloadable!]
  2. Angelo Baglioni & Andrea Monticini, 2008. "The intraday interest rate under a liquidity crisis: the case of August 2007," DISCE - Quaderni dell'Istituto di Economia e Finanza ief0083, Università Cattolica del Sacro Cuore, Dipartimenti e Istituti di Scienze Economiche (DISCE). [Downloadable!]
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