Entry Decisions and Adverse Selection: An Empirical Analysis of Local Credit Markets
During the last decades there has been a widespread relaxation of legal entry barriers into the banking industry, with potential benefits for financial integration and competition. Obstacles to banks' geographical and business expansion have been removed and branching has been substantially liberalized. This paper analyzes the determinants of entry decisions into local credit markets using a unique data set before and after deregulation of the Italian banking industry. We estimate an entry model ï¿½ la Poisson and find evidence that spreads between loan and deposit rates drive entry only for newly chartered banks, but does not affect the decision to open branches of banks operating in other markets. Branching by outside banks is instead positively correlated with business opportunities in the provision of financial services which do not require the acquisition of substantial proprietary information. Both these results are consistent with the hypothesis that in credit markets incumbents have an informational advantage over new entrants.
(This abstract was borrowed from another version of this item.)
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.:
- Shaffer, Sherrill, 1998.
"The Winner's Curse in Banking,"
Journal of Financial Intermediation,
Elsevier, vol. 7(4), pages 359-392, October.
- Michael H. Riordan, 1992. "Competition and Bank Performance: A Theoretical Perspective," Papers 0026, Boston University - Industry Studies Programme.
- Besanko, David & Thakor, Anjan V., 1992. "Banking deregulation: Allocational consequences of relaxing entry barriers," Journal of Banking & Finance, Elsevier, vol. 16(5), pages 909-932, September.
- Dario Focarelli & Alberto Franco Pozzolo, 2005.
"Where Do Banks Expand Abroad? An Empirical Analysis,"
The Journal of Business,
University of Chicago Press, vol. 78(6), pages 2435-2464, November.
- Focarelli, Dario & Pozzolo, Alberto Franco, 2003. "Where Do Banks Expand Abroad? An Empirical Analysis," Economics & Statistics Discussion Papers esdp03009, University of Molise, Dept. EGSeI.
- Rajan, Raghuram G, 1992. " Insiders and Outsiders: The Choice between Informed and Arm's-Length Debt," Journal of Finance, American Finance Association, vol. 47(4), pages 1367-400, September.
- Allen N. Berger & Gregory F. Udell, 2002.
"Small Business Credit Availability and Relationship Lending: The Importance of Bank Organisational Structure,"
Royal Economic Society, vol. 112(477), pages F32-F53, February.
- Allen N. Berger & Gregory F. Udell, 2001. "Small business credit availability and relationship lending: the importance of bank organizational structure," Finance and Economics Discussion Series 2001-36, Board of Governors of the Federal Reserve System (U.S.).
- Lawrence G. Goldberg & Lawrence J. White, 1997.
"De Novo Banks and Lending to Small Businesses: An Empirical Analysis,"
New York University, Leonard N. Stern School Finance Department Working Paper Seires
98-039, New York University, Leonard N. Stern School of Business-.
- Goldberg, Lawrence G. & White, Lawrence J., 1998. "De novo banks and lending to small businesses: An empirical analysis," Journal of Banking & Finance, Elsevier, vol. 22(6-8), pages 851-867, August.
- Emilia Bonaccorsi di Patti & Giovanni Dell'Ariccia, 2000.
"Bank competition and firm creation,"
680, Federal Reserve Bank of Chicago.
- Emilia Bonaccorsi di Patti & Giovanni Dell & Ariccia#x2019, 2000. "Bank Competition and Firm Creation," Center for Financial Institutions Working Papers 00-20, Wharton School Center for Financial Institutions, University of Pennsylvania.
- Emilia Bonaccorsi Di Patti & Giovanni Dell'Ariccia, 2003. "Bank competition and firm creation," Temi di discussione (Economic working papers) 481, Bank of Italy, Economic Research and International Relations Area.
- Vives, Xavier, 1991. "Regulatory reform in European banking," European Economic Review, Elsevier, vol. 35(2-3), pages 505-515, April.
- Hausman, Jerry & Hall, Bronwyn H & Griliches, Zvi, 1984.
"Econometric Models for Count Data with an Application to the Patents-R&D Relationship,"
Econometric Society, vol. 52(4), pages 909-38, July.
- Jerry A. Hausman & Bronwyn H. Hall & Zvi Griliches, 1984. "Econometric Models for Count Data with an Application to the Patents-R&D Relationship," NBER Technical Working Papers 0017, National Bureau of Economic Research, Inc.
- Dell'Ariccia, Giovanni & Marquez, Robert, 2004. "Information and bank credit allocation," Journal of Financial Economics, Elsevier, vol. 72(1), pages 185-214, April.
- Fabio Panetta & Dario Focarelli, 2003. "Are Mergers Beneficial to Consumers? Evidence from the Italian Market for Bank Deposits," CEIS Research Paper 10, Tor Vergata University, CEIS.
- Arnoud W. A. Boot & Anjan V. Thakor, 1998.
"The Many Faces of Information Disclosure,"
William Davidson Institute Working Papers Series
80, William Davidson Institute at the University of Michigan.
- Marcello Bofondi & Giorgio Gobbi, 2004. "Bad Loans and Entry into Local Credit Markets," Temi di discussione (Economic working papers) 509, Bank of Italy, Economic Research and International Relations Area.
- Bonaccorsi di Patti, Emilia & Gobbi, Giorgio, 2001. "The changing structure of local credit markets: Are small businesses special?," Journal of Banking & Finance, Elsevier, vol. 25(12), pages 2209-2237, December.
- Paola Maggiolini & Paolo Mistrulli, 2005. "A survival analysis of de novo co-operative credit banks," Empirical Economics, Springer, vol. 30(2), pages 359-378, 09.
- Enrico Santarelli, 2000. "The duration of new firms in banking: an application of Cox regression analysis," Empirical Economics, Springer, vol. 25(2), pages 315-325.
- Robert Marquez, 2002. "Competition, Adverse Selection, and Information Dispersion in the Banking Industry," Review of Financial Studies, Society for Financial Studies, vol. 15(3), pages 901-926.
When requesting a correction, please mention this item's handle: RePEc:kap:jfsres:v:26:y:2004:i:3:p:225-244. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Guenther Eichhorn)or (Christopher F. Baum)
If references are entirely missing, you can add them using this form.