The Role of the Local Business Environment in Banking Consolidation

Luca Colombo and Gilberto Turati ()

No ief0076, DISCE - Quaderni dell'Istituto di Economia e Finanza from Università Cattolica del Sacro Cuore, Dipartimenti e Istituti di Scienze Economiche (DISCE)

Abstract: We study whether local economic conditions in different areas have an impact on the magnitude and direction of the concentration process of a banking industry. By using probit and count data (ZIP) models to study the consolidation of the Italian banking sector in the second half of the 1990s, we document a significant direct impact of the local ‘business environment’ on the concentration of the industry at the regional level. This effect complements the well known indirect effect of macroeconomic characteristics on the profitability and efficiency of banks. We also show that institutional and organizational variables affect the likelihood and number of M&A deals, and help explaining differences in performance. Our results appear to be robust to different specifications, and to a number of robustness checks, including alternative sets of variables defining local ‘business environment conditions’.

Keywords: Banking M&As; local business environment; profitability; efficiency; credit policies; count data models (search for similar items in EconPapers)
JEL-codes: G21 G34 L16 (search for similar items in EconPapers)
Pages: nn pages 28
Date: 2008-01
New Economics Papers: this item is included in nep-ban, nep-com, nep-cse and nep-eff
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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