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Cross-Border Banking, Bank Market Structures and Market Power: Theory and Cross-Country Evidence

Referierte Aufsätze Web of Science

Franziska M. Bremus

In: Journal of Banking & Finance 50 (2015), S. 242-259

Abstract

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.



JEL-Classification: E44;F41;G21
Keywords: Cross-border lending, Bank foreign direct investment, Bank market concentration, Net interest margins
DOI:
http://dx.doi.org/10.1016/j.jbankfin.2014.10.008

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