Multimarket competition and profitability: evidence from Ukrainian banks

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Multimarket competition and profitability : evidence from Ukrainian banks. / Pham, Tho; Talavera, Oleksandr; Yang, Junhong.

In: Oxford Economic Papers, 07.06.2019.

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@article{726f56769e9447ab867bb05239ff2ffc,
title = "Multimarket competition and profitability: evidence from Ukrainian banks",
abstract = "This paper examines the impact of multimarket competition on bank performance. Exploiting a unique data set of Ukrainian banks{\textquoteright} branch locations, we construct three measures of multimarket contacts and find their positive effects on profitability. This finding supports the mutual forbearance hypothesis: the higher number of overlapped markets increases familiarity and similarity among multimarket rivals and makes them reluctant to compete aggressively. Further, we establish an identification strategy using the 2014 geopolitical conflict between Ukraine and Russia as an exogenous shock to banks{\textquoteright} branch networks. Our estimates show that the impact of the conflict on the mutual forbearance associated with banks{\textquoteright} multimarket contracts is more pronounced for shock-exposed banks compared to less exposed counterparts and thus the former experiences lower profitability after the conflict.JEL classification:",
keywords = "multimarket competition, mutual forbearance hypothesis, profitability, difference-in-differences, geopolitical shock",
author = "Tho Pham and Oleksandr Talavera and Junhong Yang",
year = "2019",
month = jun,
day = "7",
doi = "10.1093/oep/gpz041",
language = "English",
journal = "Oxford Economic Papers",
issn = "0030-7653",
publisher = "Oxford University Press",

}

RIS

TY - JOUR

T1 - Multimarket competition and profitability

T2 - evidence from Ukrainian banks

AU - Pham, Tho

AU - Talavera, Oleksandr

AU - Yang, Junhong

PY - 2019/6/7

Y1 - 2019/6/7

N2 - This paper examines the impact of multimarket competition on bank performance. Exploiting a unique data set of Ukrainian banks’ branch locations, we construct three measures of multimarket contacts and find their positive effects on profitability. This finding supports the mutual forbearance hypothesis: the higher number of overlapped markets increases familiarity and similarity among multimarket rivals and makes them reluctant to compete aggressively. Further, we establish an identification strategy using the 2014 geopolitical conflict between Ukraine and Russia as an exogenous shock to banks’ branch networks. Our estimates show that the impact of the conflict on the mutual forbearance associated with banks’ multimarket contracts is more pronounced for shock-exposed banks compared to less exposed counterparts and thus the former experiences lower profitability after the conflict.JEL classification:

AB - This paper examines the impact of multimarket competition on bank performance. Exploiting a unique data set of Ukrainian banks’ branch locations, we construct three measures of multimarket contacts and find their positive effects on profitability. This finding supports the mutual forbearance hypothesis: the higher number of overlapped markets increases familiarity and similarity among multimarket rivals and makes them reluctant to compete aggressively. Further, we establish an identification strategy using the 2014 geopolitical conflict between Ukraine and Russia as an exogenous shock to banks’ branch networks. Our estimates show that the impact of the conflict on the mutual forbearance associated with banks’ multimarket contracts is more pronounced for shock-exposed banks compared to less exposed counterparts and thus the former experiences lower profitability after the conflict.JEL classification:

KW - multimarket competition

KW - mutual forbearance hypothesis

KW - profitability

KW - difference-in-differences

KW - geopolitical shock

U2 - 10.1093/oep/gpz041

DO - 10.1093/oep/gpz041

M3 - Article

JO - Oxford Economic Papers

JF - Oxford Economic Papers

SN - 0030-7653

M1 - gpz041

ER -