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Pham, Tho, Talavera, Oleksandr and Yang, Junhong (2020) 'Multimarket competition and profitability: evidence from Ukrainian banks.' Oxford Economic Papers, 72 (2). pp. 517-545.

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Abstract

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 contacts is more pronounced for shock-exposed banks compared to less exposed counterparts and thus the former experiences lower profitability after the conflict.

Item Type: Journal Article
SOAS Departments & Centres: Departments and Subunits > School of Finance & Management
ISSN: 0030-7653
Copyright Statement: © Oxford University Press 2019. All rights reserved. This is the accepted manuscript of an article published by Oxford University Press in Oxford Economics Paper. Available online: https://doi.org/10.1093/oep/gpz041
DOI (Digital Object Identifier): https://doi.org/10.1093/oep/gpz041
Date Deposited: 20 Apr 2020 07:42
URI: https://eprints.soas.ac.uk/id/eprint/32617

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