Does cross-ownership affect competition? Evidence from the Italian banking industry

The purpose of this paper is to empirically investigate the effects of cross-ownership among Italian banks on competition in the national banking sector. This aim is pursued by measuring and comparing the degree of competition between banks involved in the web of cross-ownership and banks that are not involved. The bank’s degree of competition is measured by applying the methodology developed by Panzar and Rosse (1987). The econometric results provide empirical evidence that, in the period 1996-2000, Italian banks involved in cross-ownership were less competitive than the other national credit firms, thus supporting the view that cross-ownership may represent an obstacle to industrial competition.