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The efficiency implications of financial conglomeration

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  • Mälkönen, Ville

Abstract

This paper studies the competitive and efficiency implications of financial conglomeration driven by cost-efficiency gains in monitoring credit and insurance customers.The analysis shows that conglomeration is conducive to tougher competition in the credit market and increases profit in insurance.The aggregate profit in the financial sector does not increase, because the conglomerates pass the cost-efficiency gains on to the borrowers in full.More competitive market for financial services also reduces the aggregate risk in the financial markets, indicating that capital requirements in both sectors should be lower in the presence of financial conglomerates

Suggested Citation

  • Mälkönen, Ville, 2004. "The efficiency implications of financial conglomeration," Bank of Finland Research Discussion Papers 17/2004, Bank of Finland.
    • Handle: RePEc:zbw:bofrdp:rdp2004_017
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    References listed on IDEAS

    as
    1. Vesala, Timo, 2004. "Asymmetric information in credit markets and entrepreneurial risk taking," Research Discussion Papers 14/2004, Bank of Finland.
    2. Kajanoja, Lauri, 2004. "Extracting growth and inflation expectations from financial market data," Research Discussion Papers 2/2004, Bank of Finland.
    3. Allen Berger & Iftekhar Hasan & Leora Klapper, 2004. "Further Evidence on the Link between Finance and Growth: An International Analysis of Community Banking and Economic Performance," Journal of Financial Services Research, Springer;Western Finance Association, vol. 25(2), pages 169-202, April.
    4. David G. Mayes & Matti Virén, 2004. "Asymmetries in the Euro area economy," Macroeconomics 0404024, University Library of Munich, Germany.
    5. Railavo, Jukka, 2004. "Stability consequences of fiscal policy rules," Research Discussion Papers 1/2004, Bank of Finland.
    6. David G. Mayes, 2004. "An approach to bank insolvency in transition and emerging economies," Finance 0404015, University Library of Munich, Germany.
    7. Paloviita, Maritta & Mayes, David, 2005. "The use of real-time information in Phillips-curve relationships for the euro area," The North American Journal of Economics and Finance, Elsevier, vol. 16(3), pages 415-434, December.
    8. Erkki Koskela & Roope Uusitalo, 2003. "The Un-Intended Convergence: How the Finnish Unemployment Reached the European Level," CESifo Working Paper Series 878, CESifo.
    9. Kauppi, Heikki & Koskela, Erkki & Stenbacka, Rune, 2004. "Equilibrium unemployment and investment under product and labour market imperfections," Bank of Finland Research Discussion Papers 11/2004, Bank of Finland.
    10. David G. Mayes & Matti Virén, 2004. "Asymmetries in the Euro area economy," Macroeconomics 0404024, University Library of Munich, Germany.
    11. Jukka Railavo, 2004. "Stability consequences of fiscal policy rules," Macroeconomics 0404020, University Library of Munich, Germany.
    12. Allen Berger & Iftekhar Hasan & Leora Klapper, 2004. "Further Evidence on the Link between Finance and Growth: An International Analysis of Community Banking and Economic Performance," Journal of Financial Services Research, Springer;Western Finance Association, vol. 25(2), pages 169-202, April.
    13. Rautureau, Nicolas, 2004. "Measuring the long-term perception of monetary policy and the term structure," Research Discussion Papers 12/2004, Bank of Finland.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

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    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • L40 - Industrial Organization - - Antitrust Issues and Policies - - - General

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