Distance, bank heterogeneity and entry in local banking markets

We examine the determinants of entry into Italian local banking markets during the period 1991-2002 and build a simple model in which the probability of branching in a new market depends on the features of both the local market and the potential entrant. Econometric findings show that banks are more...

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Bibliographic Details
Published in:	The Journal of industrial economics 2008-09, Vol.LVI (3), p.500-534
Main Authors:	Felici, Roberto, Pagnini, Marcello
Format:	Article
Language:	eng
Subjects:	Bank operations Banking system Commercial banks Italy Local finance Market entry
Online Access:	Get full text
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Summary:	We examine the determinants of entry into Italian local banking markets during the period 1991-2002 and build a simple model in which the probability of branching in a new market depends on the features of both the local market and the potential entrant. Econometric findings show that banks are more likely to expand into those markets that are closest to their pre-entry locations. Large banks are also more able to cope with distance-related entry costs than small banks. Finally, banks have become increasingly able to open branches in distant markets, due to the advent of information and communication technologies. Reprinted by permission of Blackwell Publishers
ISSN:	0022-1821 1467-6451