submarkets and the evolution of market structure we construct a model of industry evolution in which the central force for change is the creation and destruction of submarkets firms expand when they are able to exploit new opportunities that arrive in the form of submarkets they contract and ultimately exit when the submarkets in which they operate are destroyed this simple framework can transparently explain a wide range of well known regularities about industry dynamics most notably the subtle relationships between size age growth and survival data on the laser industry where submarkets are prominent further illustrate the ability of the model to explain distinctive patterns in the evolution of industries and firms

firm size distribution testing the independent submarkets model in the italian motor insurance industry this paper tests the presence of multiple independent submarkets in the italian motor insurance industry independence is motivated by administrative boundaries among provinces and by further locational reasons we find that the independence effects are sufficient to induce a minimum degree of inequality in the size distribution of firms once submarkets are aggregated these results are fully consistent with the predictions of sutton 1998 we also show that the degree of skewness in the firms size distribution is related to characteristics such as the population living in an area its density and the riskiness of a submarket

multimarket competition in banking with an example from the portuguese market abstract banks typically have more than one branch and their activities usually span over several markets this multilocational nature of banks generates equilibrium price dispersion the paper proposes a spatial competition model to explain price differences across banks in the deposits market the model allows to separate two different sources of observed market power collusion in the industry and product differentiation induced by location in local markets an application to portuguese commercial banking is reported as an illustration

modelling price competition across many markets an application to the spanish loans market abstract the purpose of this work is the structural modelling of price competition in a product differentiated industry in which many firms of varying size compete across many independent small markets with the target of identifying price behaviour we apply it to model competition among the more than 79 banks that were active in the spanish loans market during the period 1983 1991 using micropanel data a model in which national banks as opposed to regional and local banks fully internalize their cross rate effects in pricing is selected as the model that best fits the data our framework allows us to estimate the dead weight loss due to market power and to decompose it assessing the part attributable to price coordination

institutional failure or market failure we investigate the effect of the power of creditors property rights protection and institutional quality on bank profits using a panel of 498 banks from 46 countries results show that better institutions and stronger property rights protection reduce bank profits while stronger power of creditors drives up bank profits significantly results imply that better institutions and enhanced property rights protection lead to greater flow of credit allowing firms and investors to undertake more profitable ventures by extension stronger creditor rights erect steeper barriers to external finance for firms and investors national indicators of economic freedoms may be more important to lowering the spread than strict creditor rights seemingly credit markets fail when economic institutions fail or when governments intervene into these markets in ways that impede the safety and soundness of financial transactions and private contracting

shared atm networks and banking competition abstract in this paper we study the incentives of banks to share their automatic teller machines atms when they are competitors in the market for deposits we construct a stylized model of banking competition which emphasises the distinctive features of atm compatibility we find that in equilibrium either a strict subset of banks share their atms or total incompatibility prevails we also derive the implications for atm compatibility of withdrawal fees interchange bank fees entry and depositor switching costs finally we investigate the normative implications of our model and draw some policy conclusions

does judicial efficiency lower the cost of credit the authors investigate the effect of judicial efficiency on banks lending spreads for a large cross section of countries they measure bank interest rate spreads for 106 countries at an aggregate level and for 32 countries at the level of individual banks the authors find that after controlling for a number of other country characteristics judicial efficiency in addition to inflation is the main driver of interest rate spreads across countries this suggests that in addition to improving the overall macroeconomic climate in a country judicial reforms through a better enforcement of legal contracts are critical to lowering the cost of financial intermediation for households and firms

herd behaviour by japanese banks after financial deregulation this paper investigates whether japanese banks followed herd behaviour during the 1980s and 1990s the results indicate the existence of herding during the sample period while the inefficiency of herding is concentrated in the early to mid 1980s the period immediately after financial deregulation began evidence for the inefficient herding is observed in the behaviour of banks that made loans to new borrowers and in the behaviour of banks that followed the type of banks that were more informed on lending to new borrowers on the other hand inefficient herd behaviour is rarely observed in the 1990s

determinants of patent rights a cross national study abstract this paper presents an index of patent rights for 110 countries for the period 1960 1990 the index is used to examine what factors or characteristics of economies determine how strongly patent rights will be protected the evidence does indicate that more developed economies tend to provide stronger protection but the underlying factors which influence patent protection levels are the country s level of research and development r d activity market environment and international integration which are correlated with its level of development the results qualify however that r d activity influences patent protection levels after a nation s research sector reaches a critical size an implication of this is that to raise patent protection levels in weakly protecting countries it is important to foster a significant research base in those countries and thereby create incentives for protecting patent rights

the impact of mean reversion of bank profitability on post merger performance in the banking industry abstract this research study examines the tendency for serial correlation in bank holding company profitability finding significant evidence of reversion to the industry mean in profitability the paper then considers the impact of mean reversion on the evaluation of post merger performance of bank holding companies the research concludes that when an adjustment is made for the mean reversion post merger results significantly exceed those of the industry in the first 5 years after the merger

why are interest spreads so high in uganda using international comparisons and a unique bank level dataset on the ugandan banking system over the period 1999 to 2005 we explore the factors behind consistently high interest rate spreads and margins international comparisons show that the small size of ugandan banks persistently high t bill rates and institutional deficiencies explain large proportions of the high ugandan interest rate margins the ugandan bank panel confirms the importance of macroeconomic factors such as high inflation high t bill rates and exchange rate appreciation there is also evidence for the small market place and high costs of doing business explaining persistently high spreads and margins smaller banks and banks targeting the low end of the market incur higher costs and therefore higher margins spreads and margins also vary significantly with the sectoral loan portfolio composition of banks while there is little evidence for foreign bank entry privatization or changes in market structure explaining variation in spreads or margins over time

spatial competition in the banking system localization cross subsidies and the regulation of deposit rates abstract the paper analyses a spatial competition model of the banking sector banks offer two kind of services deposits and credit and can either borrow or lend on the money market we investigate the consequences of the regulation of rates paid on deposits the main conclusions are as follows regulation first increases network size beyond social optimum in the long run it results in lower equilibrium credit rates because of increased competition secondly regulation generates tied sales contracts by which banks propose bundles of credit and deposit services tied sales in turn motivate the introduction of cross subsidies between the two activities the rent levied upon regulated deposits financing lower rates in the credit market finally it is shown that in a regulated environment the effectiveness of monetary policy is reduced in the sense that fluctuations of money market rates are less than fully transmitted in credit rates

the independent submarkets model an application to the spanish retail banking market abstract the aim of this paper is to test the predictions of sutton s independent submarkets model with data on the spanish retail banking market the prediction of this model for aggregates of submarkets is that the form of equilibrium outcome must involve some minimal degree of size inequality however within each submarket when three conditions hold the only form of equilibrium outcome will be an extreme fragmented structure to test these predictions firstly i propose methods to identify independent submarkets then i analyze the degree of inequality in bank sizes for markets with different levels of aggregation submarkets regions and national market using concentration by towns data i find that in single submarket towns the degree of inequality of the size among banks is zero moreover multimarket towns with a significant degree of concentration are shown to be formed by a different number of independent submarkets where each bank owns one branch nonetheless when the regional and the national bank markets are considered the degree of inequality in bank sizes becomes high these results are consistent with the predictions of the theoretical model

exchange rate expectations the role of person specific forward looking variables abstract we analyze how individual forecasters build their foreign exchange rate expectations the wall street journal poll allows us to incorporate explanatory variables such as expected inflation rates and expected gdp growth rates that are both forward looking and person specific

latent submarket dynamics and industry evolution lessons from the us laser industry in its first 35 years the us laser industry was characterized by steady growth in output and the number of producers whereas subsequently the number of producers steadily declined despite continued growth in the industry s output a model of industry evolution that features the creation destruction and fusing of independent submarkets is developed to explain these two eras data on all laser producers are used to test various implications of the model concerning entry exit and innovation the findings suggest that the emergence of an integrative submarket can fundamentally alter an industry s market structure and the character of innovation which is applied to explain historical developments in the evolution of various innovative industries

profits persistence and ownership evidence from the italian banking sector the hypothesis that ownership structure affects persistence of profits in the italian banking industry is tested the time invariant components of roa and roe are regressed against ownership concentration and the fraction of shares held by the major shareholders the results show that abnormal profits increase if ownership is concentrated in foundations and banks and decrease if market forces are allowed to operate

does market structure matter on banks profitability and stability emerging vs advanced economies abstract we empirically investigate the effects of market structure on profitability and stability for 1929 banks in 40 emerging and advanced economies over 1999 2008 by incorporating the traditional structure conduct performance scp and relative market power rmp hypotheses we observe that a greater market share leads to higher bank profitability being biased toward the rmp hypothesis in advanced economies yet neither of the hypotheses is supported for profitability in emerging economies the scp appears to exert a destabilising effect on advanced banks suggesting that a more concentrated banking system may be vulnerable to financial instability however the rmp seems to perform a stabilising effect in both economies evidence also highlights that profitability and stability increase with an increased interest margin revenues in a less competitive environment for emerging markets overall these results suggest that although policy measures to promote competition may dampen economic rent excessive implementation may have an undesired destabilising impact on banks

funding growth in bank based and market based financial systems evidence from firm level data the authors investigate whether firms access to external financing to fund growth differs between market based and bank based financial systems using firm level data for forty countries they compute the proportion of firms in each country that relies on external finance and examine how that proportion differs across financial systems they find that the development of a country s legal system predicts access to external finance and that stock markets and the banking system have different effects on access to external markets the development of securities markets is related more to the availability of long term financing whereas the development of the banking sector is related more to the availability of short term financing they find no evidence however that firms access to external financing is predicted by an index of the development of stock markets relative to the development of the banking system

privatization and bank performance in developing countries abstract we examine the postprivatization performance of 81 banks from 22 developing countries our results suggest that i on average banks chosen for privatization have a lower economic efficiency and a lower solvency than banks kept under government ownership ii in the postprivatization period profitability increases but depending on the type of owner efficiency risk exposure and capitalization may worsen or improve however iii over time privatization yields significant improvements in economic efficiency and credit risk exposure iv we also find that newly privatized banks that are controlled by local industrial groups become more exposed to credit risk and interest rate risk after privatization

privatization financial development property rights and growth abstract this study analyzes how prevailing institutional arrangements i e property rights contracting rights political institutions and corporate governance practices affect privatized firms performance capital markets development and economic growth most of the studies surveyed show that privatization enhances privatized firms performance efficiency and profitability which percolates to economic growth privatized firms performed better in countries with better regulatory and legal frameworks partial privatization may be beneficial in countries with weak institutions namely the french civil law countries the stronger the economic and the governing institutions the easier it is for privatized firms to thrive and contribute to economic growth overall privatization allows firms to achieve improved efficiency while driving the development of the financial sector

corruption in bank lending to firms cross country micro evidence on the beneficial role of competition and information sharing abstract building on the important study by beck demirguc kunt and levine 2006 bank supervision and corruption in lending journal of monetary economics 53 2131 2163 we examine the effects of both borrower and lender competition as well as information sharing via credit bureaus registries on corruption in bank lending using the unique world bank data set wbes covering more than 4 000 firms across 56 countries with information on credit bureaus registries assembled by djankov mcliesh and shleifer 2007 private credit in 129 countries journal of financial economics 84 299 329 and bank regulation data collected by barth caprio and levine 2006 rethinking bank regulation till angels govern cambridge university press new york to measure bank competition and information sharing we find strong evidence that both banking competition and information sharing reduce lending corruption and that information sharing also helps enhance the positive effect of competition in curtailing lending corruption we also find that the ownership structure of firms and banks legal environment and firm competition all exert significant impacts on lending corruption