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Interlocking Directorates and Competition in Banking

Guglielmo Barone (), Fabiano Schivardi () and Enrico Sette

No 2011, EIEF Working Papers Series from Einaudi Institute for Economics and Finance (EIEF)

Abstract: We study the effects on loan rates of a quasi-experimental change in the Italian legislation which forbids interlocking directorates between banks. We use a difference-in-differences approach and exploit multiple banking relationships to control for unobserved heterogeneity. We find that the reform decreased rates charged by previously interlocked banks to common customers by between 10-30 basis points. The effect is stronger if the firm had a weaker bargaining power vis-a-vis the interlocked banks. Consistent with the assumption that interlocking directorates facilitate collusion, interest rates on loans from interlocked banks become more dispersed after the reform.

Pages: 29 pages
Date: 2020, Revised 2020-05
New Economics Papers: this item is included in nep-ban, nep-com and nep-eff
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Working Paper: Interlocking Directorates and Competition in Banking (2022) Downloads
Working Paper: Interlocking Directorates and Competition in Banking (2020) Downloads
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