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Multilevel empirics for small banks in local markets

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  • Aiello, Francesco
  • Bonanno, Graziella

Abstract

Banking is increasingly a-spatial. However, the environment matters for small banks. Indeed, they are embedded in narrowed markets and hence benefit from proximity to their member-customers. By referring to multilevel approach, this article aims at measuring how much the performance of Italian mutual-cooperative banks is determined by both geographical (provincial level) and individual characteristics (small bank level). The effect of local markets explains 28.27% of bank heterogeneity in the empty multilevel model and 33% in the most extended model. Moreover, it is found that bank efficiency increases with market concentration and demand density and decreases with branching in local markets.

Suggested Citation

  • Aiello, Francesco & Bonanno, Graziella, 2015. "Multilevel empirics for small banks in local markets," MPRA Paper 64399, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:64399
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    Keywords

    Multilevel model; mutual-cooperative banks; local markets; cost efficiency;

    JEL classification:

    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • D00 - Microeconomics - - General - - - General
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • R19 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Other

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