Cross-border banking, bank market structures and market power: Theory and cross-country evidence
Journal of Banking & Finance, 2015, vol. 50, issue C, 242-259
Patterns in cross-border banking have changed since the global financial crisis. This may affect domestic bank market structures and macroeconomic stability in the longer term. In this study, I theoretically and empirically analyze how different modes of cross-border banking impact bank concentration and market power. I use a two-country general equilibrium model with heterogeneous banks developed by DeBlas and Russ (2010a) to grasp the effect of cross-border lending and foreign direct investment in the banking sector on bank market structures. The model suggests that both cross-border lending and bank FDI mitigate concentration. Empirical evidence from a panel dataset of 18 OECD countries supports the theoretical predictions: higher volumes of bank FDI and of cross-border lending coincide with lower Herfindahl-indexes in bank credit markets.
Keywords: Cross-border lending; Bank foreign direct investment; Bank market concentration; Net interest margins (search for similar items in EconPapers)
JEL-codes: E44 F41 G21 (search for similar items in EconPapers)
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Working Paper: Cross-Border Banking, Bank Market Structures and Market Power: Theory and Cross-Country Evidence (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:50:y:2015:i:c:p:242-259
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