Distance, Bank Heterogeneity and Entry in Local Banking Markets

35 Pages Posted: 12 Nov 2008

Abstract

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.

Suggested Citation

Felici, Roberto and Pagnini, Marcello, Distance, Bank Heterogeneity and Entry in Local Banking Markets. Journal of Industrial Economics, Vol. 56, Issue 3, pp. 500-534, September 2008, Available at SSRN: https://ssrn.com/abstract=1299277 or http://dx.doi.org/10.1111/j.1467-6451.2008.00357.x

Roberto Felici (Contact Author)

Bank of Italy ( email )

Via Nazionale 91
00184 Roma
Italy

Marcello Pagnini

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

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