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Scope Economies and Competition Beyond the Balance Sheet: a ‘broad banking’ Experience

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Abstract

There is a recent trend in banking research aiming to assess how financial innovation and technology are affecting bank cost, revenue and profits. Most of the studies have not found significant cost, profit or revenue complementarities either between traditional and non-traditional banking products or between traditional activities themselves. We study complementarities in a ‘broad banking’ environment: the Spanish banking sector. The results indicate that after including off-balance sheet business in the output mix, cost and profit scope economies increase significantly. Besides, consumer valuation of financial services is only detected when the off-balance sheet business is added to the output definition.

Suggested Citation

  • Santiago Carbó Valverde & Francisco Rodríguez Fernández, 2004. "Scope Economies and Competition Beyond the Balance Sheet: a ‘broad banking’ Experience," Economic Working Papers at Centro de Estudios Andaluces E2004/13, Centro de Estudios Andaluces.
  • Handle: RePEc:cea:doctra:e2004_13
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    Keywords

    banking; cost; profit; scope economies; off-balance sheet.;

    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

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