Information Sharing and Cross-border Entry in European Banking

Caterina Giannetti, Nicola Jentzsch and Giancarlo Spagnolo

No 178, CEIS Research Paper from Tor Vergata University, CEIS

Abstract: Information asymmetries can severely limit cross-border border expansion of banks. When a bank enters a new market, it has incomplete information about potential new clients. Such asymmetries are reduced by credit registers, which distribute financial data on bank clients. We investigate the interaction of credit registers and bank entry modes (in form of branching and M&A) by using a new set of time series cross-section data for the EU-27 countries. We study how the presence of public and private credit registers and the type of information exchanged affect bank entry modes during the period 1990-2007. Our analysis shows that the existence of both types of registers increases the share of branching in the overall entries. Additionally, the establishment of public registers reduces concentration ratios, and some banking competition indicators (such as overhead costs/assets). The introduction of a private credit bureau, on the other hand, has no effect on concentration ratios, but positively contributes to competition (by decreasing interest rate margins). This suggests that credit registers facilitate direct entry through a reduction of information asymmetries, which in turn intensifies competition.

Keywords: credit registries; foreign entry; asymmetric information (search for similar items in EconPapers)
JEL-codes: F37 G21 G34 L13 O16 (search for similar items in EconPapers)
Pages: 34 pages
Date: 2010-12-21, Revised 2010-12-21
New Economics Papers: this item is included in nep-ban, nep-com and nep-cta
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Citations: View citations in EconPapers (2)

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Working Paper: Information Sharing and Cross-border Entry in European Banking (2010)
Working Paper: Information Sharing and Cross-Border Entry in European Banking (2010)
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