SHOULD BANK BRANCHING BE REGULATED - THEORY AND EMPIRICAL-EVIDENCE FROM 4 EUROPEAN COUNTRIES

Along with the liberalisation of bank branching, which was pushed ahea d in most OECD member countries during the past several decades, the f ear of 'overbranched' markets has arisen. In a model of spatial compet ition, the welfare effects of bank branching regulation are investigat ed and empirical results are presented from a pooled cross-section tim e series analysis from four European countries. It is shown that for a ll observations in the sample, fewer branches would have been socially undesirable. Moreover, the frequently posed hypothesis that a positiv e relationship exists between the number of branches and the price for financial intermediation is rejected.