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Erosion_of_Barriers_to_Entry_in_the_Banking_Industry_Evidence_from_...

Erosion_of_Barriers_to_Entry_in_the_Banking_Industry_Evidence_from_...

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Erosion of Barriers to Entry in the Banking Industry   Evidence from the Impact of the Emerging Financial Markets on the  Swiss Banking Structure 1850-1920 Oxford Economics History Workshop 5 th  June 2008 Andreas Mattig University St. Gallen
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Organization 2
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Idea, Motivation and Central Argument 1 3
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Idea and Motivation „History Motivation“:  Few is known about the banking and capital market in Switzerland. No doubt, the financial system‘s  most dynamic period was the post-WW II years, however the bank‘s reputation in the war years had  to be have its roots earlier… „Policy Motivation“:  What happens to the banking industry structure under increased capital openness? We have a set of  emerging economies, but the corresponding results are often strongly biased by local political, cultural  or legal mechanisms. The analysis of non-regulated market data under similar conditions might be  valuable  „General industry structure and Theory Motivation“:  Industry data is often not to easy to be handled and analyzed: Multicollinearity is a permanent issue  and in today‘s market efficiency is often too high to really measure structural shifts over time 4
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Methodology and Data This is no empirical paper! The approach relies on inductive theory building and  starts with a central argument as „quasi-hypothesis“. The methodology can be  grouped into four stages: (1) We observed descriptive patterns and analyzed the existing data set (2) A model (Veloce-Zellner) was applied to describe the economics behind the patterns formally (3) The model was adjusted for the specific conditions and re-solved, resulting in a dominant role of the  individual firm‘s cost of liquidity for survival and growth dynamics in the emerging industry (4) The evidence was summarized in four propositions Data is derived from the Swiss National Bank, various state archives and a first  descriptive approach by Ritzmann (1963) 5
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Central Argument  The Central Argument in this presentation is that  the emergence of an international capital market in Switzerland came as some kind of an economic  shock after the country was turned into a capital lender after producing and exporting surpluses for  years the emergence of an international capital market in Switzerland lead to a re-valuation of asset prices the role of financial intermediaries changed from foreign agents and asset managers towards  transformation of risks and maturities the value of bank liquidity was sharply increased during this process new entering banks won a sustainable comparative advantage over the incumbents within  a short  period of time 6
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