Foreign ownership and market power: The special case of European banks

Panayotis D. Alexakis and Ioannis G. Samantas

Journal of Banking & Finance, 2020, vol. 118, issue C

Abstract: The paper examines the nexus of foreign ownership and competition which is at the center of recent mandates for coordination between competition and regulation policies. We match estimates of market power with ownership data for 949 banks in 26 European countries over 1997-2013. We show that well-capitalised banks tend to enjoy high monopoly rents through cost-cutting strategies after entering emerging markets via M&As. Foreign presence has a U-shaped relationship with market power in the developed Europe, where Greenfield investments appear also as a mechanism through which country-level foreign presence leads to lower mark-ups. The results are robust to various specifications that address parameter heterogeneity and selection bias.

Keywords: Market power; European banks; Foreign ownership; Semiparametric modeling (search for similar items in EconPapers)
JEL-codes: C14 D40 G2 L40 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:118:y:2020:i:c:s0378426620301230

DOI: 10.1016/j.jbankfin.2020.105857

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