Information Sharing and Cross-Border Entry in European Banking

34 Pages Posted: 16 Dec 2010

See all articles by Caterina Giannetti

Caterina Giannetti

University of Jena; University of Bologna - Department of Economics

Giancarlo Spagnolo

Stockholm School of Economics (SITE); Centre for Economic Policy Research (CEPR); University of Rome 'Tor Vergata'; EIEF

Nicola Jentzsch

DIW Berlin

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Date Written: December, 16 2010

Abstract

Information asymmetries can severely limit cross-border border expansion of banks. When a bank enters a new market, it has incomplete information about potential new clients. Such asymmetries are reduced by credit registers, which distribute financial data on bank clients. We investigate the interaction of credit registers and bank entry modes (in form of branching and M&A) by using a new set of time series cross-section data for the EU-27 countries. We study how the presence of public and private credit registers and the type of information exchanged affect bank entry modes during the period 1990-2007. Our analysis shows that the existence of both types of registers increases the share of branching in the overall entries. Additionally, the establishment of public registers reduces concentration ratios, and some banking competition indicators (such as overhead costs/assets). The introduction of a private credit bureau, on the other hand, has no effect on concentration ratios, but positively contributes to competition (by decreasing interest rate margins). This suggests that credit registers facilitate direct entry through a reduction of information asymmetries, which in turn intensifies competition.

Keywords: credit registries, foreign entry, asymmetric information

JEL Classification: F37, G21, G34, L13, O16

Suggested Citation

Giannetti, Caterina and Spagnolo, Giancarlo and Jentzsch, Nicola, Information Sharing and Cross-Border Entry in European Banking (December, 16 2010). CEIS Working Paper No. 178, Available at SSRN: https://ssrn.com/abstract=1726337 or http://dx.doi.org/10.2139/ssrn.1726337

Caterina Giannetti

University of Jena ( email )

Furstengraben 1
Jena, Thuringa 07743
Germany

University of Bologna - Department of Economics ( email )

Strada Maggiore 45
Bologna, 40125
Italy

Giancarlo Spagnolo (Contact Author)

Stockholm School of Economics (SITE) ( email )

P.O. Box 6501
Stockholm
Sweden

HOME PAGE: http://https://sites.google.com/site/giancarlospagnoloshomepage/

Centre for Economic Policy Research (CEPR)

London
United Kingdom

University of Rome 'Tor Vergata' ( email )

Faculty of Economics - DEI
Via Columbia 2
Rome, RM 00133
Italy

EIEF ( email )

Via Due Macelli, 73
Rome, 00187
Italy

HOME PAGE: http://WWW.EIEF.IT

Nicola Jentzsch

DIW Berlin ( email )

Mohrenstraße 58
Berlin, 10117
Germany

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