IDEAS home Printed from https://ideas.repec.org/a/sae/ausman/v43y2018i2p241-262.html
   My bibliography  Save this article

The dynamics of bank location decisions in Australia

Author

Listed:
  • Christopher Heard
  • Flavio M Menezes
  • Alicia N Rambaldi

Abstract

This article exploits a large panel to study trends in, and determinants of, the decisions made by the four largest Australian banks about whether to establish or maintain branch- and automated teller machine (ATM)-level presence in a local market between 2002 and 2013. These decisions are potentially important for competition in local banking markets. Our analysis suggests that past presence is the most important factor for explaining current presence in a particular local market. Moreover, we present evidence that the four largest banks co-locate branches. The relationship between the location of other (smaller) banks and the location of the four largest banks is less clear; there is some limited evidence that this relationship is negative for two of the four largest banks. Our results also suggest that the four largest banks displayed changed behaviour in terms of their branch location decisions after the global financial crisis and that the changes differed between banks. Our analysis of ATM location decisions reveals that the four largest banks follow different strategies. These results suggest that Australian banks did not shy away from this limited form of competition, either before or after the global financial crisis (GFC). JEL Classification: C23, D43, G21, L13

Suggested Citation

  • Christopher Heard & Flavio M Menezes & Alicia N Rambaldi, 2018. "The dynamics of bank location decisions in Australia," Australian Journal of Management, Australian School of Business, vol. 43(2), pages 241-262, May.
  • Handle: RePEc:sae:ausman:v:43:y:2018:i:2:p:241-262
    DOI: 10.1177/0312896217717572
    as

    Download full text from publisher

    File URL: https://journals.sagepub.com/doi/10.1177/0312896217717572
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Peter Davis, 2006. "Spatial competition in retail markets: movie theaters," RAND Journal of Economics, RAND Corporation, vol. 37(4), pages 964-982, December.
    2. Jeffrey M. Wooldridge, 2005. "Simple solutions to the initial conditions problem in dynamic, nonlinear panel data models with unobserved heterogeneity," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 20(1), pages 39-54.
    3. Victor Aguirregabiria & Gustavo Vicentini, 2006. "Dynamic Spatial Competition Between Multi-Store Firms," Working Papers tecipa-253, University of Toronto, Department of Economics.
    4. Raphael Thomadsen, 2007. "Product Positioning and Competition: The Role of Location in the Fast Food Industry," Marketing Science, INFORMS, vol. 26(6), pages 792-804, 11-12.
    5. Nicola Cetorelli & Philip E. Strahan, 2006. "Finance as a Barrier to Entry: Bank Competition and Industry Structure in Local U.S. Markets," Journal of Finance, American Finance Association, vol. 61(1), pages 437-461, February.
    6. Gilles Duranton & Henry G. Overman, 2005. "Testing for Localization Using Micro-Geographic Data," Review of Economic Studies, Oxford University Press, vol. 72(4), pages 1077-1106.
    7. repec:rje:randje:v:37:y:2006:i:4:p:964-982 is not listed on IDEAS
    8. Huysentruyt, Marieke & Lefevere, Eva & Menon, Carlo, 2013. "Dynamics of retail-bank branching in Antwerp (Belgium) 1991–2006: Evidence from micro-geographic data," Journal of Banking & Finance, Elsevier, vol. 37(2), pages 291-304.
    9. Richards, Timothy J. & Acharya, Ram N. & Kagan, Albert, 2008. "Spatial competition and market power in banking," Journal of Economics and Business, Elsevier, vol. 60(5), pages 436-454.
    10. Michael Koetter & James W. Kolari & Laura Spierdijk, 2012. "Enjoying the Quiet Life under Deregulation? Evidence from Adjusted Lerner Indices for U.S. Banks," The Review of Economics and Statistics, MIT Press, vol. 94(2), pages 462-480, May.
    11. Sofronis Clerides & Manthos D. Delis & Sotirios Kokas, 2013. "A new data set on competition in national banking markets," University of Cyprus Working Papers in Economics 08-2013, University of Cyprus Department of Economics.
    12. Keeley, Michael C, 1990. "Deposit Insurance, Risk, and Market Power in Banking," American Economic Review, American Economic Association, vol. 80(5), pages 1183-1200, December.
    13. Gary Chamberlain, 1980. "Analysis of Covariance with Qualitative Data," Review of Economic Studies, Oxford University Press, vol. 47(1), pages 225-238.
    14. Mundlak, Yair, 1978. "On the Pooling of Time Series and Cross Section Data," Econometrica, Econometric Society, vol. 46(1), pages 69-85, January.
    15. Thomas J. Holmes, 2011. "The Diffusion of Wal‐Mart and Economies of Density," Econometrica, Econometric Society, vol. 79(1), pages 253-302, January.
    16. Khoa TA Hoang & Robert Faff & Mamiza Haq, 2014. "Market discipline and bank risk taking," Australian Journal of Management, Australian School of Business, vol. 39(3), pages 327-350, August.
    17. Ho, Katherine & Ishii, Joy, 2011. "Location and competition in retail banking," International Journal of Industrial Organization, Elsevier, vol. 29(5), pages 537-546, September.
    18. A. P. Lerner, 1934. "The Concept of Monopoly and the Measurement of Monopoly Power," Review of Economic Studies, Oxford University Press, vol. 1(3), pages 157-175.
    19. Bernadette Donovan & Adam Gorajek, 2011. "Developments in the Structure of the Australian Financial System," RBA Bulletin (Print copy discontinued), Reserve Bank of Australia, pages 29-40, June.
    20. Robert Breunig & Flavio Menezes, 2008. "Empirical Approaches For Identifying Maverick Firms: An Application To Mortgage Providers In Australia," Journal of Competition Law and Economics, Oxford University Press, vol. 4(3), pages 811-836.
    21. Shams Pathan & Mamiza Haq & Barry Williams, 2016. "Does skin in the game help? Bank franchise value, managerial incentives and ‘going for broke’," Australian Journal of Management, Australian School of Business, vol. 41(2), pages 271-298, May.
    22. Andrew Cohen & Michael Mazzeo, 2010. "Investment Strategies and Market Structure: An Empirical Analysis of Bank Branching Decisions," Journal of Financial Services Research, Springer;Western Finance Association, vol. 38(1), pages 1-21, August.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Martina K Linnenluecke & Mauricio Marrone & Abhay K Singh, 2020. "Conducting systematic literature reviews and bibliometric analyses," Australian Journal of Management, Australian School of Business, vol. 45(2), pages 175-194, May.
    2. Yiyi Bai & Zhisheng Li & Huan Liu, 2019. "Financial outreach and household financial constraint," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 58(5), pages 1503-1523, March.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Brei, Michael & Jacolin, Luc & Noah, Alphonse, 2020. "Credit risk and bank competition in Sub-Saharan Africa," Emerging Markets Review, Elsevier, vol. 44(C).
    2. Bogdan Capraru & Nicoleta-Livia Pintilie, 2017. "Assessing competition in the European Union banking sector," The Review of Finance and Banking, Academia de Studii Economice din Bucuresti, Romania / Facultatea de Finante, Asigurari, Banci si Burse de Valori / Catedra de Finante, vol. 9(1), pages 007-026, June.
    3. Shaffer, Sherrill & Spierdijk, Laura, 2020. "Measuring multi-product banks’ market power using the Lerner index," Journal of Banking & Finance, Elsevier, vol. 117(C).
    4. Koetter, Michael, 2013. "Market structure and competition in German banking: Modules I and IV," Working Papers 06/2013, German Council of Economic Experts / Sachverständigenrat zur Begutachtung der gesamtwirtschaftlichen Entwicklung.
    5. Manthos D. Delis & Sotirios Kokas & Steven Ongena, 2016. "Foreign Ownership and Market Power in Banking: Evidence from a World Sample," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 48(2-3), pages 449-483, March.
    6. Wang, Hui & Riedinger, Jeffrey & Jin, Songqing, 2015. "Land documents, tenure security and land rental development: Panel evidence from China," China Economic Review, Elsevier, vol. 36(C), pages 220-235.
    7. Mitsukuni Nishida, 2015. "Estimating a Model of Strategic Network Choice: The Convenience-Store Industry in Okinawa," Marketing Science, INFORMS, vol. 34(1), pages 20-38, January.
    8. Lionel WILNER, 2019. "The Dynamics of Individual Happiness," Working Papers 2019-18, Center for Research in Economics and Statistics.
    9. Hernández-Quevedo, Cristina & Jones, Andrew M. & Rice, Nigel, 2008. "Persistence in health limitations: A European comparative analysis," Journal of Health Economics, Elsevier, vol. 27(6), pages 1472-1488, December.
    10. Ha Trong Nguyen & Luke B. Connelly, 2017. "The Dynamics of Informal Care Provision in an Australian Household Panel Survey: Previous Work Characteristics and Future Care Provision," The Economic Record, The Economic Society of Australia, vol. 93(302), pages 395-419, September.
    11. Toni Mora & Joan Gil & Antoni Sicras-Mainar, 2012. "The Influence of BMI, Obesity and Overweight on Medical Costs: A Panel Data Approach," Working Papers 2012-08, FEDEA.
    12. Bluhm, Richard & Crombrugghe, Denis de & Szirmai, Adam, 2012. "Explaining the dynamics of stagnation: An empirical examination of the North, Wallis and Weingast approach," MERIT Working Papers 2012-040, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    13. Toni Mora & Joan Gil & Antoni Sicras-Mainar, 2015. "The influence of obesity and overweight on medical costs: a panel data perspective," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 16(2), pages 161-173, March.
    14. Hajivassiliou, Vassilis, 2019. "Estimation and specification testing of panel data models with non-ignorable persistent heterogeneity, contemporaneous and intertemporal simultaneity and observable and unobservable dynamics," LSE Research Online Documents on Economics 102843, London School of Economics and Political Science, LSE Library.
    15. Kouki, Imen & Al-Nasser, Amjad, 2017. "The implication of banking competition: Evidence from African countries," Research in International Business and Finance, Elsevier, vol. 39(PB), pages 878-895.
    16. Goetz, Martin, 2016. "Competition and bank stability," CFS Working Paper Series 559, Center for Financial Studies (CFS).
    17. Giulia Bettin & Riccardo Lucchetti & Claudia Pigini, 2016. "State dependence and unobserved heterogeneity in a double hurdle model for remittances: evidence from immigrants to Germany," Mo.Fi.R. Working Papers 127, Money and Finance Research group (Mo.Fi.R.) - Univ. Politecnica Marche - Dept. Economic and Social Sciences.
    18. Manudeep Bhuller & Christian N. Brinch & Sebastian Königs, 2017. "Time Aggregation and State Dependence in Welfare Receipt," Economic Journal, Royal Economic Society, vol. 127(604), pages 1833-1873, September.
    19. Koetter, Michael & Müller, Carola & Noth, Felix & Fritz, Benedikt, 2018. "May the force be with you: Exit barriers, governance shocks, and profitability sclerosis in banking," Discussion Papers 49/2018, Deutsche Bundesbank.
    20. Leroy, Aurélien & Lucotte, Yannick, 2017. "Is there a competition-stability trade-off in European banking?," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 46(C), pages 199-215.

    More about this item

    Keywords

    Banking; branch location; entry; exit;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:sae:ausman:v:43:y:2018:i:2:p:241-262. 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: (SAGE Publications). General contact details of provider: http://www.agsm.edu.au .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.