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Dissertation Committee:
Jan Hanousek
Libor Dušek
Evžen Kočenda
Krešimir Žigić
Ronald Anderson

Abstract:

The thesis consists of four chapters and is primarily a contribution to the literature on the microeconomics of banking. The first chapter (joint work with Petr Chovanec) focuses on alternative explanations of the apparent vast international differences in retail bank fees between countries on different levels of economic development. Apart from the usual form of asymmetric information between the bank and its borrowers (i.e. the assumption that the bank cannot observe the borrower's type), the additional assumption is that the borrowers themselves can have false perceptions about their quality. It is shown that the higher is the degree of the borrower's misperceptions about their skills the higher fees should be expected. In an alternative setup it is shown that comparable results can be received when banks possess imperfect testing technology (this assumption replaces the assumption about the borrower's false perceptions). Moreover, simulations using both setups also imply that under realistic conditions increasing wealth inequality in a country (measured by a Gini index) leads to higher fees.

The second chapter (joint work with Petr Chovanec) focuses on the effects of inter-bank information sharing on the degree of competition in the banking industry. Information sharing is shown to be an effective device for facilitating tacit collusion between banks and under some conditions even leads to a natural oligopoly outcome in which there is a maximum number of banks supporting a stable equilibrium in the market. The important contribution to the existing literature is that the results hold even under transactional banking (i.e. without repeated bank-borrower encounters) and also under the realistic assumption that banks also share the information about loan application history instead of just the information about past defaults.

One of the important outcomes of the first chapter is that banks may use tying of loans to deposits in order to create an effective offering with the desired screening characteristics. The third chapter focuses on the relationship between the loan and deposit side on a more general level. It is shown that the bank's decisions about loans and deposits are interdependent under very general conditions, even in an environment without asymmetric information. Evaluations of policy measures aimed at one of the two sides of the banks' business should thus take into account also the implied effects on the other side (e.g. deposit rate controls which have recently received renewed interest among both academics and policymakers and are still used in a number of less developed countries).

The fourth chapter of the dissertation is empirical and focuses on the analysis of the determinants of retail bank fees in the Central European region with the special focus on explaining the international differences in fees. The analysis is based on the predictions of the existing literature and uses a unique dataset with interesting cross-developmental variation on one hand and important similarities implied by the traditional ties between the countries on the other hand. Due to the characteristics of the dataset, it is possible to use a representative client approach and thus overcome some of the potential biases inherent to studying individual fees. The results support the Structure Conduct Performance hypothesis and confirm the hypothesized importance of the degree of reliance on cashless payments as well as the importance of the differences in labor intensity and technological level of the banks' operations.

Full Text: “Essays on the Microeconomics of Banking” by Pavel Dvořák