Entry decisions and adverse selection: an empirical analysis of a 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.
|Date of creation:||Dec 2004|
|Contact details of provider:|| Postal: Via Nazionale, 91 - 00184 Roma|
Web page: http://www.bancaditalia.it
More information through EDIRC
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.:
- Boot, Arnoud W A & Thakor, Anjan V, 2001.
"The Many Faces of Information Disclosure,"
Review of Financial Studies,
Society for Financial Studies, vol. 14(4), pages 1021-1057.
- 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.
- Vesala, Jukka, 1995. "Testing for competition in banking : Behavioral evidence from Finland," Scientific Monographs, Bank of Finland, number 1995_001, 05.
- Hausman, Jerry & Hall, Bronwyn H & Griliches, Zvi, 1984. "Econometric Models for Count Data with an Application to the Patents-R&D Relationship," Econometrica, Econometric Society, vol. 52(4), pages 909-938, 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.
- 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.
- Bonaccorsi di Patti, Emilia & Dell'Ariccia, Giovanni, 2004. "Bank Competition and Firm Creation," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 36(2), pages 225-251, April.
- 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.
- Giovanni Dell'Ariccia, 2001. "Bank Competition and Firm Creation," IMF Working Papers 01/21, International Monetary Fund.
- Emilia Bonaccorsi di Patti & Giovanni Dell'Ariccia, 2000. "Bank competition and firm creation," Proceedings 680, Federal Reserve Bank of Chicago.
- Shaffer, Sherrill, 1998. "The Winner's Curse in Banking," Journal of Financial Intermediation, Elsevier, vol. 7(4), pages 359-392, October.
- Sherrill Shaffer, 1997. "The winner's curse in banking," Working Papers 97-25, Federal Reserve Bank of Philadelphia.
- 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.
- 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.
- 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.
- 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-.
- Vives, Xavier, 1991. "Regulatory reform in European banking," European Economic Review, Elsevier, vol. 35(2-3), pages 505-515, April.
- Allen N. Berger & Gregory F. Udell, 2002. "Small Business Credit Availability and Relationship Lending: The Importance of Bank Organisational Structure," Economic Journal, Royal Economic Society, vol. 112(477), pages 32-53, 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.).
- 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.
- 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.
- Dell'Ariccia, Giovanni & Marquez, Robert, 2004. "Information and bank credit allocation," Journal of Financial Economics, Elsevier, vol. 72(1), pages 185-214, April.
- 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 1367-1400, September.
- Michael H. Riordan, 1992. "Competition and Bank Performance: A Theoretical Perspective," Papers 0026, Boston University - Industry Studies Programme.
- 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.
- 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.
- 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. Full references (including those not matched with items on IDEAS)