85 Pages Posted: 3 Jan 2016 Last revised: 24 Jul 2016
Date Written: July 23, 2016
We use a uniquely extensive branch-level dataset on deposit account interest rates, maintenance fees, and fee thresholds, and document substantial time-series and cross-sectional variation in these prices. We then examine whether variation in bank concentration helps explain the variation in prices. The standard measure of concentration, the HHI, is not correlated with any of the outcome variables. We then construct a generalized HHI (GHHI) that captures both common ownership (the degree to which banks are commonly owned by the same investors) and cross-ownership (the extent to which banks own shares in each other). The GHHI is strongly correlated with all prices. We use the growth of index funds as an arguably exogenous source of cross-sectional variation of county-level common ownership growth to suggest a causal link from the GHHI to higher prices for banking products.
Keywords: Competition, Ownership, Diversification, Pricing, Antitrust, Governance, Product Market, Bank Competition
JEL Classification: L41, L10, G34
Suggested Citation: Suggested Citation
Azar, José and Raina, Sahil and Schmalz, Martin C., Ultimate Ownership and Bank Competition (July 23, 2016). Available at SSRN: https://ssrn.com/abstract=2710252 or http://dx.doi.org/10.2139/ssrn.2710252