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The effects of privatization and consolidation on bank productivity: comparative evidence from Italy and Germany

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  • Fiorentino, Elisabetta
  • Vincenzo, Alessio De
  • Heid, Frank
  • Karmann, Alexander
  • Koetter, Michael

Abstract

The Italian and German banking systems shared similar characteristics early in the 1990s but have evolved in different directions since then: Italy privatized its publicly-owned banks while Germany has maintained a large share of state-owned savings banks. Contemporaneously, banks in both markets engaged heavily in mergers and acquisitions. We analyze how these activities have affected banks' productivity in the period 1994-2004, differentiating between technical change, efficiency change and scale economies. We find that privatized banks experienced a significant increase in productivity, especially if they subsequently merged with other banks. German banks were still able to increase their productivity through consolidation.

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  • Fiorentino, Elisabetta & Vincenzo, Alessio De & Heid, Frank & Karmann, Alexander & Koetter, Michael, 2009. "The effects of privatization and consolidation on bank productivity: comparative evidence from Italy and Germany," Discussion Paper Series 2: Banking and Financial Studies 2009,03, Deutsche Bundesbank.
    • Handle: RePEc:zbw:bubdp2:200903
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    Cited by:

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    2. Casu, Barbara & Ferrari, Alessandra & Girardone, Claudia & Wilson, John O.S., 2016. "Integration, productivity and technological spillovers: Evidence for eurozone banking industries," European Journal of Operational Research, Elsevier, vol. 255(3), pages 971-983.
    3. Christian Castro & Jorge E. Galán, 2019. "Drivers of Productivity in the Spanish Banking Sector: Recent Evidence," Journal of Financial Services Research, Springer;Western Finance Association, vol. 55(2), pages 115-141, June.
    4. Giorgio Barba Navaretti & Anna Cecilia Rosso, 2023. "Access to capital markets and the geography of productivity leaders and laggards," Journal of Regional Science, Wiley Blackwell, vol. 63(1), pages 64-113, January.
    5. Tari , Fathollah & Mohammadi , Teymour & Shakeri , Abbas & Fadavi , Mohsen, 2017. "The Effect of Privatization in the Iranian Banking System on the Indicators of Profitability of Private, State and Privatized Banks," Journal of Money and Economy, Monetary and Banking Research Institute, Central Bank of the Islamic Republic of Iran, vol. 12(4), pages 359-378, October.
    6. Valter Giacinto, 2010. "On vector autoregressive modeling in space and time," Journal of Geographical Systems, Springer, vol. 12(2), pages 125-154, June.
    7. Cristian Barra & Nazzareno Ruggiero, 2022. "Firm innovation and local bank efficiency in Italy: Does the type of bank matter?," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 93(4), pages 1083-1128, December.
    8. Philip Molyneux, 2013. "Performance in European Banking: Productivity, Profitability and Employment Trends," SUERF 50th Anniversary Volume Chapters, in: Morten Balling & Ernest Gnan (ed.), 50 Years of Money and Finance: Lessons and Challenges, chapter 10, pages 355-376, SUERF - The European Money and Finance Forum.
    9. Daniela Marconi, 2010. "Trade, technical progress and the environment: the role of a unilateral green tax on consumption," Temi di discussione (Economic working papers) 744, Bank of Italy, Economic Research and International Relations Area.
    10. Manfred Neumann, 2011. "Comment on ‘Competition Tests with a Non‐Structural Model: The Panzar–Rosse Method Applied to Germany's Savings Banks’," German Economic Review, Verein für Socialpolitik, vol. 12(2), pages 239-241, May.
    11. Cardinale, Roberto & Belotti, Emanuele, 2022. "The rise of the shareholding state in Italy: A policy-oriented strategist or simply a shareholder? Evidence from the energy and banking sectors’ privatizations," Structural Change and Economic Dynamics, Elsevier, vol. 62(C), pages 52-60.

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    More about this item

    Keywords

    Banking market integration; deregulation; total factor productivity; Italy; Germany;
    All these keywords.

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • L33 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Comparison of Public and Private Enterprise and Nonprofit Institutions; Privatization; Contracting Out

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