This study examines the determinants of cooperative banks' diversification proclivity, with consideration of the spatial dependence effect. The empirical analysis demonstrates that Italian cooperative banks operate as a network with significant spillover effects that should not be ignored. Indeed, local banks compete in the same market segment, and any shift in their diversification strategy has a cascading effect on neighbouring cooperative banks as a result of customer migration. Finally, we observe that an increase in bank market power results in a decline in local bank lending activity.
Do spatial dependence and market power matter in the diversification of cooperative banks?
Algeri, Carmelo
Primo
;Forgione, Antonio Fabio;Migliardo, CarloUltimo
2022-01-01
Abstract
This study examines the determinants of cooperative banks' diversification proclivity, with consideration of the spatial dependence effect. The empirical analysis demonstrates that Italian cooperative banks operate as a network with significant spillover effects that should not be ignored. Indeed, local banks compete in the same market segment, and any shift in their diversification strategy has a cascading effect on neighbouring cooperative banks as a result of customer migration. Finally, we observe that an increase in bank market power results in a decline in local bank lending activity.File in questo prodotto:
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Economic Notes - 2022 - Algeri - Do spatial dependence and market power matter in the diversification of cooperative banks.pdf
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