DP14654 Interlocking Directorates and Competition in Banking
|Author(s):||Guglielmo Barone, Fabiano Schivardi, Enrico Sette|
|Publication Date:||April 2020|
|Keyword(s):||Banking, Competition, Interlocking directorates|
|Programme Areas:||Financial Economics, Industrial Organization|
|Link to this Page:||cepr.org/active/publications/discussion_papers/dp.php?dpno=14654|
We study the effects on loan rates of a quasi-experimental change in the Italian legislation which forbids interlocking directorates between banks. We use a difference-in-differences approach and exploit multiple banking relationships to control for unobserved heterogeneity. We find that the reform decreased rates charged by previously interlocked banks to common customers by between 10-30 basis points. The effect is stronger if the firm had a weaker bargaining power vis-a-vis the interlocked banks. Consistent with the assumption that interlocking directorates facilitate collusion, interest rates on loans from interlocked banks become more dispersed after the reform.