Post-entry expansion in banking: The case of Portugal

The deregulation of the Portuguese banking sector from a system with administratively fixed interest rates and entry controls to a freer market regime has been steady over the last decade. Removal of entry constraints has given rise to strong growth in branches as the result of a post-entry game. Behavior differences between incumbents and entrants are observed. Surprisingly, no response of incumbents to entrants is found. Incumbent banks seem to follow each other in expansion patterns. Entrants by acquisition (privatized banks) were more prone to branch expansion, revealing a strong effect associated with this type of entry.