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The Role of the Local Business Environment in Banking Consolidation

  • Luca Colombo

    ()

    (DISCE, Università Cattolica)

  • Gilberto Turati

    ()

    (DISCE, Università Cattolica)

We study whether local economic conditions in different areas have an impact on the magnitude and direction of the concentration process of a banking industry. By using probit and count data (ZIP) models to study the consolidation of the Italian banking sector in the second half of the 1990s, we document a significant direct impact of the local ‘business environment’ on the concentration of the industry at the regional level. This effect complements the well known indirect effect of macroeconomic characteristics on the profitability and efficiency of banks. We also show that institutional and organizational variables affect the likelihood and number of M&A deals, and help explaining differences in performance. Our results appear to be robust to different specifications, and to a number of robustness checks, including alternative sets of variables defining local ‘business environment conditions’.

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File URL: http://www.unicatt.it/Istituti/EconomiaFinanza/Quaderni/ief0076.pdf
File Function: First version, 2007
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Paper provided by Università Cattolica del Sacro Cuore, Dipartimenti e Istituti di Scienze Economiche (DISCE) in its series DISCE - Quaderni dell'Istituto di Economia e Finanza with number ief0076.

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Length: nn pages 28
Date of creation: Jan 2008
Date of revision:
Handle: RePEc:ctc:serie3:ief0076
Contact details of provider: Web page: http://www.unicatt.it/Istituti/EconomiaFinanza
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  16. Thorsten Beck & Asli Demirgüç-Kunt & Vojislav Maksimovic, 2005. "Financial and Legal Constraints to Growth: Does Firm Size Matter?," Journal of Finance, American Finance Association, vol. 60(1), pages 137-177, 02.
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