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Local Market Structure and Bank Competition: evidence from the Brazilian auto loan market

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  • Bruno Martins

Abstract

Asymmetric information and transportation costs incurred by borrowers may raise spatial price discrimination in bank lending. This paper exploits the large geographic dispersion in the market structure of the Brazilian banking sector to investigate the relationship between market concentration and bank competition. Local markets are also distinguished by the degree of barrier to entry in order to assess its effect on bank competitive behavior. The findings indicate a negative correlation between market concentration and bank competition and an even stronger effect in locations where the barriers to entry are higher. The paper also highlights the importance of evaluating the geographic impact of mergers and acquisitions for the analysis of the effect of market concentration on bank competition.

Suggested Citation

  • Bruno Martins, 2012. "Local Market Structure and Bank Competition: evidence from the Brazilian auto loan market," Working Papers Series 299, Central Bank of Brazil, Research Department.
    • Handle: RePEc:bcb:wpaper:299
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    File URL: https://www.bcb.gov.br/content/publicacoes/WorkingPaperSeries/wps299.pdf
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    References listed on IDEAS

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    Cited by:

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    2. Thiago Trafane Oliveira Santos, 2021. "High Lending Interest Rates in Brazil: cost or concentration?," Working Papers Series 550, Central Bank of Brazil, Research Department.
    3. Papadimitriou, Theophilos & Gogas, Periklis & Tabak, Benjamin M., 2013. "Complex networks and banking systems supervision," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 392(19), pages 4429-4434.
    4. Machado, Vicente da Gama & Portugal, Marcelo Savino, 2014. "Measuring inflation persistence in Brazil using a multivariate model," Revista Brasileira de Economia - RBE, EPGE Brazilian School of Economics and Finance - FGV EPGE (Brazil), vol. 68(2), June.

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