ادغام عمودی برای جلوگیری از انعقاد قرارداد با رقبای بالقوه : مدارک و شواهد از بانک های بانکداران
|کد مقاله||سال انتشار||تعداد صفحات مقاله انگلیسی||ترجمه فارسی|
|1108||2012||18 صفحه PDF||سفارش دهید|
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Publisher : Elsevier - Science Direct (الزویر - ساینس دایرکت)
Journal : Journal of Financial Economics, Volume 105, Issue 1, July 2012, Pages 113–130
We examine a vertical integration decision within the commercial banking industry. During the last quarter of the 20th century, some community banks reduced their traditional reliance on correspondent banks for upstream products and services by joining bankers' banks, a form of business cooperative. Research on vertical integration focuses primarily on firm-specific investment, market power, and government regulation. However, this case is difficult to explain in terms of these standard vertical integration motives. Our evidence suggests that bankers' banks are a response to technological change and deregulation that results in increased costs faced by community banks in dealing with correspondent banks as both suppliers and potential competitors. For instance, loan participations require sharing proprietary information about major loan customers, something a community bank would not want to provide to a potential competitor.
Firms must decide whether to make or buy their inputs. Theory explaining this choice generally focuses on transactions costs, property rights, market power, and government regulation. Related empirical work, which concentrates primarily on testing the transaction cost explanation, provides strong support for the hypothesis that firms vertically integrate to mitigate potential holdup problems associated with firm-specific investments, particularly when inputs are complex and environments are uncertain.3 Evidence also suggests that market power—attempts to create or avoid it—and government regulation can motivate vertical integration.4 But substantial cross-sectional and time-series variation in make-versus-buy decisions exists in industries where asset specificity, market power, and government regulation appear unimportant (for example, in various trade and service industries). In this paper, we examine additional factors that affect vertical organization within such a setting. Our study focuses on the make-versus-buy decision within the banking industry during the last quarter of the 20th century. During this period, a number of community banks reduced their reliance on large, independent banks for upstream products and services by contracting with business cooperatives known as bankers' banks. This move toward vertical integration appears difficult to explain using standard arguments. Specific investment in banking is relatively unimportant. The market power of community banks is unlikely to be affected by this organizational change. And, over this period, the market power of large banks within interbank markets does not appear to have increased. Meanwhile, banking is becoming less (not more) regulated.5 Prior to 1975, virtually all community banks obtained products and services (such as loan participations and check clearing) through correspondent relationships with large regional or money center banks. Deregulation and technological change during the last third of the 20th century increased the likelihood that these large banks would compete with community banks in their local retail and commercial lending markets. Our evidence indicates that a substantial number of community banks vertically integrated over this period through contracting with business cooperatives, known as bankers' banks. Banker's banks have no retail banking operations. Thus, by establishing correspondent banking relationships with a bankers' bank, a community bank avoids contracting with (and hence providing information to) potential competitors. For example, loan participations require sharing proprietary information about loan customers. A community bank would be reluctant to provide such information to a potential competitor, as this information might allow its correspondent bank to solicit its best customers. Similar concerns arise when a community bank obtains other correspondent services from a potential competitor: internal audit; credit analysis; loan, audit, and compliance reviews; confidential record handling and destruction; consulting; and training. The business press has expressed concerns about securing proprietary information from competitors in the context of vertical organization and contracting (for example, Barrar and Gervais, 2006). However, academic analysis of this topic is limited. Asker and Ljungqvist (2010) provide evidence that such concerns affect corporations' choices of investment banks. Our paper offers evidence on their importance in vertical organization (long-term contracting versus a form of vertical integration). Our study also provides evidence on the motives for bankers' banks and more generally on why firms form business cooperatives. We examine the growth of this organizational innovation as a potential example of Economic Darwinism. Alchian (1950) and Stigler (1958) argue that others copy effective innovations. Our data allow us to provide evidence on this frequently offered, but rarely tested, Economic Darwinism hypothesis. Furthermore, we believe that our paper is particularly timely because interest in the interdependencies among financial institutions has increased since the financial crisis of 2009. Limiting our attention to the banking industry has both advantages and disadvantages. An important advantage is that this recent development of bankers' banks provides a valuable opportunity to analyze both time-series and cross-sectional evidence on vertical organization. In contrast to industries with more static organizational patterns, we can observe important environmental changes as well as resulting organizational innovation. This allows us to identify more precisely the economic factors that are likely to affect vertical organization and to provide evidence on their explanatory power. In addition, by focusing on an industry in which the standard hypotheses do not appear to explain vertical organization choices, we offer a compelling case that the current list of potential (non-mutually exclusive) explanations is incomplete. However, a disadvantage of concentrating on a single industry is that additional work is required to assess the extent to which similar concerns affect vertical organization within other industries.6 Our paper is organized as follows. In Section 2 we provide background information about the banking industry and bankers' banks. We review the economics of business cooperatives and develop our hypotheses in Section 3. We present our empirical results in Section 4. In Section 5 we conclude with a brief summary of our results and their implications.
نتیجه گیری انگلیسی
Over the past several decades, the technological and regulatory environment facing banks has changed substantially. Economies of scale mean that small banks cannot efficiently produce all the services their customers demand. Prior to the early 1980s most banks obtained such services by contracting with correspondent banks. But increasing competition as a result of deregulation means that these banks now face a potential cost of providing detailed information about their customers to these service providers—the correspondent bank might compete for these customers. One solution to this problem is consolidation. However, it might not be optimal for all small banks to be absorbed by larger, vertically integrated banking organizations. For example, Brickley, Linck, and Smith (2003) and Berger, Miller, Petersen, Rajan, and Stein (2005) suggest that small banks have a comparative advantage over large banks in some environments and with certain types of customers. As a result, the banking industry has produced an organizational innovation: the bankers' bank. A bankers' bank is a business cooperative that serves community banks without the threat of competing for their customers. Theory suggests that cooperatives are likely to arise in environments where the costs of independent contracting are high, the benefits of local ownership are large, and the costs of creating a cooperative organization are low. Consistent with this, our evidence suggests that the bankers' bank arose as a response to deregulation and the resulting increased costs faced by community banks when dealing with a large bank as a correspondent partner. Further, our evidence suggests that banks are more likely to use a banker' bank's services when they face greater competition from their traditional correspondent partners. Finally, we believe our analysis provides evidence on the process of economic Darwinism. We show how this innovation was copied and spread throughout the nation.