Economics at your fingertips  

Ownership Concentration and Competition in Banking Markets

Alexandra Lai () and Raphael Solomon

Staff Working Papers from Bank of Canada

Abstract: Many countries prohibit large shareholdings in their domestic banks. The authors examine whether such a restriction restrains competition in a duopolistic loan market. Blockholders may influence managers' output decisions by choosing capital structure, as in Brander and Lewis (1986). For the blockholder, debt has an additional benefit: it "disciplines" a manager by reducing the amount of free cash flow from which the manager can divert funds. A larger blockholder can exert more control. The authors show that an economy with blockholders often leads to a more competitive banking sector. Hence, a restriction on the size of blockholdings has anti-competitive results.

Keywords: Financial institutions; Financial services; Financial system regulation and policies (search for similar items in EconPapers)
JEL-codes: G21 G28 G32 L10 (search for similar items in EconPapers)
Pages: 37 pages
Date: 2006
New Economics Papers: this item is included in nep-ban, nep-com, nep-fin and nep-fmk
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2) Track citations by RSS feed

Downloads: (external link)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

Access Statistics for this paper

More papers in Staff Working Papers from Bank of Canada 234 Wellington Street, Ottawa, Ontario, K1A 0G9, Canada. Contact information at EDIRC.
Bibliographic data for series maintained by ().

Page updated 2023-01-25
Handle: RePEc:bca:bocawp:06-7