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Dynamic branching and interest rate competition of commercial banks: Evidence from Hungary

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  • Temesvary, Judit

Abstract

I supplement previous models of bank competition by incorporating the endogenous branching choices of commercial banks. I apply a dynamic structural model of banks' branching and interest rate choices to a unique bank-level dataset on Hungarian commercial banks during 2004–2007. I find that banks charge a premium in interest rates for relative branch network dominance, and banks with relatively smaller networks are less likely to close branches. I present significant and robust estimates of branch setup costs and scrap values, and discuss the potential use of branching restrictions as regulatory tools to alter lending rates and consumer surplus.

Suggested Citation

  • Temesvary, Judit, 2015. "Dynamic branching and interest rate competition of commercial banks: Evidence from Hungary," International Journal of Industrial Organization, Elsevier, vol. 43(C), pages 98-110.
    • Handle: RePEc:eee:indorg:v:43:y:2015:i:c:p:98-110
    DOI: 10.1016/j.ijindorg.2015.09.003
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Shusen Qi & Ralph De Haas & Steven Ongena & Stefan Straetmans, 2017. "Move a Little Closer? Information Sharing and the Spatial Clustering of Bank Branches," Swiss Finance Institute Research Paper Series 17-74, Swiss Finance Institute.
    2. Beck, Thorsten & Ongena, Steven & Şendeniz-Yüncü, İlkay, 2019. "Keep walking? Geographical proximity, religion, and relationship banking," Journal of Corporate Finance, Elsevier, vol. 55(C), pages 49-68.
    3. Peisen LIU & Houjian LI & Shoujun HUANG, 2018. "Does Bank Concentration Affect Debt Maturity?," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(3), pages 73-87, September.

    More about this item

    Keywords

    Dynamic analysis; Endogenous branching; Spatial competition; Interest rate choices; Structural estimation;

    JEL classification:

    • C3 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables
    • G2 - Financial Economics - - Financial Institutions and Services
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance

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