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The Role of the Local Business Environment in Banking Consolidation

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  • Luca Colombo

    ()
    (DISCE, Università Cattolica)

  • Gilberto Turati

    ()
    (DISCE, Università Cattolica)

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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File URL: http://www.unicatt.it/Istituti/EconomiaFinanza/Quaderni/ief0076.pdf
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Bibliographic 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: Jan 2008
Date of revision:
Handle: RePEc:ctc:serie3:ief0076

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

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Cited by:
  1. Giuseppe Mastromatteo, 2011. "H.P. Minsky And Policies To Countervail Crises," DISCE - Quaderni dell'Istituto di Economia e Finanza ief0102, Università Cattolica del Sacro Cuore, Dipartimenti e Istituti di Scienze Economiche (DISCE).
  2. Sandro Brusco & Luca Colombo & Umberto Galmarini, 2010. "Local Governments Tax Autonomy, Lobbying, and Welfare," Department of Economics Working Papers 10-01, Stony Brook University, Department of Economics.
  3. 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).
  4. Baglioni, Angelo & Monticini, Andrea, 2010. "The intraday interest rate under a liquidity crisis: The case of August 2007," Economics Letters, Elsevier, vol. 107(2), pages 198-200, May.
  5. Giuseppe Mastromatteo, 2011. "The Debate on the Crisis: Recent Reappraisals of the Concept of Functional Finance," DISCE - Quaderni dell'Istituto di Economia e Finanza ief0105, Università Cattolica del Sacro Cuore, Dipartimenti e Istituti di Scienze Economiche (DISCE).

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