Do spatial dependence and market power matter in the diversification of cooperative banks?. (22nd June 2022)

• Record Type: Journal Article
• Authors: Algeri, Carmelo; Forgione, Antonio F.; Migliardo, Carlo
• Is Part Of: Economic notes. Volume 51:Number 3(2022)
• Page Start: n/a
• Page End: n/a
• Publication Date: 2022-06-22
• Subjects: bank diversification -- Lerner index -- SDPD models -- spatial dependence -- spatial weights matrix; Economics -- Periodicals; 330.9
• DOI: 10.1111/ecno.12204
• Languages: English
• ISSNs: 0391-5026

Abstract

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.