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Multimarket competition and profitability: evidence from Ukrainian banks

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  • Tho Pham
  • Oleksandr Talavera
  • Junhong Yang

Abstract

This paper examines the impact of multimarket competition on bank performance. Exploiting a unique data set of Ukrainian banks’ branch locations, we construct three measures of multimarket contacts and find their positive effects on profitability. This finding supports the mutual forbearance hypothesis: the higher number of overlapped markets increases familiarity and similarity among multimarket rivals and makes them reluctant to compete aggressively. Further, we establish an identification strategy using the 2014 geopolitical conflict between Ukraine and Russia as an exogenous shock to banks’ branch networks. Our estimates show that the impact of the conflict on the mutual forbearance associated with banks’ multimarket contacts is more pronounced for shock-exposed banks compared to less exposed counterparts and thus the former experiences lower profitability after the conflict.

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  • Tho Pham & Oleksandr Talavera & Junhong Yang, 2020. "Multimarket competition and profitability: evidence from Ukrainian banks," Oxford Economic Papers, Oxford University Press, vol. 72(2), pages 517-545.
    • Handle: RePEc:oup:oxecpp:v:72:y:2020:i:2:p:517-545.
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    Cited by:

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    3. Fiona Kun Yao & Ming-Jer Chen & Jiatao Li & Danielle Combs & Qiang Li, 2024. "A review of 50 years of research since Knickerbocker (1973): competitive dynamics in international business," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 55(5), pages 522-550, July.
    4. Pham, Tho & Talavera, Oleksandr & Tsapin, Andriy, 2022. "Branch network structure, authority and lending behaviour," Economic Systems, Elsevier, vol. 46(4).
    5. Arias, Jose & Talavera, Oleksandr & Tsapin, Andriy, 2022. "Bank liquidity and exposure to industry shocks: Evidence from Ukraine," Emerging Markets Review, Elsevier, vol. 53(C).
    6. Muhamadu Awal Kindzeka Wirajing & Valery Giscard Moutie & Bruno Emmanuel Ongo Nkoa & Germain Stephane Ketchoua, 2025. "An analysis of the moderating role of Internet penetration in the banking competition-banks’ profitability nexus: case of the CEMAC banking sector," Digital Finance, Springer, vol. 7(2), pages 173-200, June.
    7. El Moussawi, Chawki & Mansour, Rana, 2022. "Competition, cost efficiency and stability of banks in the MENA region," The Quarterly Review of Economics and Finance, Elsevier, vol. 84(C), pages 143-170.
    8. Tho Pham & Oleksandr Talavera & Andriy Tsapin, 2021. "Shock contagion, asset quality and lending behaviour: The case of war in Eastern Ukraine," Kyklos, Wiley Blackwell, vol. 74(2), pages 243-269, May.

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    More about this item

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • L40 - Industrial Organization - - Antitrust Issues and Policies - - - General

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