Foreign Ownership and market power: The special case of European banks
Panayotis D. Alexakis
National and Kapodistrian University of Athens
Ioannis G. Samantas
National and Kapodistrian University of Athens
Abstract
The paper examines the nexus of foreign ownership and market power in 26 European banking sectors, for the period 1997-2013. The sample comprises 11,761 bank-year estimates of marginal cost and market power, which are then matched with data on the foreign ownership status and presence across all host countries. The analysis reports strong evidence over the significant effect of well-capitalised foreign-owned banks on their monopolistic conduct. There is also a weaker indication that foreign presence leads to higher margins in large-sized foreign banks in fast-growing economies and markets of stricter regulation on capital, in which foreign penetration lies above 14% of the host banking industry.
JEL-classifications: C14; D40; G2; L40
Keywords: Market power, European banks, foreign banking; semiparametric modeling
Acknowledgments: I would like to thank University of Athens and Bank of Greece for the research fellowship and helpful comments of H. Gibson, H. Balfoussia, Y. Bilias. The usual disclaimer applies. This research was conducted when Ioannis G. Samantas was visiting Bank of Greece on the Bank’s programme of cooperation with universities
Correspondence:
Ioannis G. Samantas
Department of Economics
University of Athens
1 Sofokleous Street
10559, Athens, Greece.
Tel.: + 30 210-368 9437
E-mail: isamantas@econ.uoa.gr