Journal of Applied Finance & Banking

Competition in Local Banking Markets and the Influence of Rival Proximity

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• Abstract

   

  This paper analyzes the competitive behavior of Austrian banks with no or only one rival branch within their local home markets (municipalities). For that, we examine the association of several bank-level indicators, calculated for the period 1999-2014, with characteristics of the community and the nearest contestant. While it can be observed that competition measures, at least on average, do not vary tremendously across bank cohorts, rival proximity plays a differential role: monopolists exhibit larger mark-ups with increasing rival distance, whereas competition is strengthened in more remote duopolistic markets. Together with the observation that certain market features affect conduct as well, our results give rise to several policy recommendations.

   

  JEL classification numbers: G21, L10, R51

  Keywords: Competition, Banking, Local Markets, Rival Distance