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Can mutual banks outperform commercial banks in the loan market?
María Isabel Berenguer Maldonado and Santiago Carbó Valverde and Miguel Angel Fortes Escalona |
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This paper advances previous strategic banking literature by looking at a Cournot duopoly and a model of price competition with product differentiation in the loan market between a profit-maximizing (commercial) bank and an expense-preference (mutual) bank, where a regulatory distorsion is in place in the form of a minimum capital ratio.
Surprisingly, we find that in most cases mutual banks outperform commercial banks both in terms of market share and profits. Nevertheless, this supports recent empirical evidence of several European banking industries.
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