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Foreign ownership and market power: The special case of European banks

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  • Alexakis, Panayotis D.
  • Samantas, Ioannis G.

Abstract

The paper examines the nexus of foreign ownership and competition which is at the center of recent mandates for coordination between competition and regulation policies. We match estimates of market power with ownership data for 949 banks in 26 European countries over 1997-2013. We show that well-capitalised banks tend to enjoy high monopoly rents through cost-cutting strategies after entering emerging markets via M&As. Foreign presence has a U-shaped relationship with market power in the developed Europe, where Greenfield investments appear also as a mechanism through which country-level foreign presence leads to lower mark-ups. The results are robust to various specifications that address parameter heterogeneity and selection bias.

Suggested Citation

  • Alexakis, Panayotis D. & Samantas, Ioannis G., 2020. "Foreign ownership and market power: The special case of European banks," Journal of Banking & Finance, Elsevier, vol. 118(C).
    • Handle: RePEc:eee:jbfina:v:118:y:2020:i:c:s0378426620301230
    DOI: 10.1016/j.jbankfin.2020.105857
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    More about this item

    Keywords

    Market power; European banks; Foreign ownership; Semiparametric modeling;
    All these keywords.

    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General
    • G2 - Financial Economics - - Financial Institutions and Services
    • L40 - Industrial Organization - - Antitrust Issues and Policies - - - General

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