A New Data Set On Competition In National Banking Markets

Clerides, Sofronis; Delis, Manthos D.; Kokas, Sotirios

doi:10.1111/fmii.12030

Cited by 95 publications

(68 citation statements)

References 39 publications

(45 reference statements)

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“…As a result, the estimated price–cost margins do not correctly measure the true extent of market power. As a consequence, the authors propose a correction in the form of the efficiency adjusted Lerner index (ALI):

ALI = \frac{(Π_{i t} + T C_{i t}) - (M C_{i t} * Q_{i t})}{Π_{i t} + T C_{i t}}

where i = 1,… n is the number of banks in each of the MENA countries, Π is the total profit before taxes, ΤC is the total cost (operating plus financial cost), MC is the marginal cost calculated by the translog function given in equation , and Q is the total output proxied by the total earning assets (Clerides et al ., ). Like the standard Lerner index, the adjusted Lerner ranges from 0 to 1, with larger values indicating greater market power.…”

Section: Lerner Indexmentioning

confidence: 97%

“…The recent crisis has impacted the banking sector in the MENA region in two ways. On the one hand, it is highly likely that it reduced efficiency due to capital losses and non‐performing loans suffered by many banks, while on the other hand, the rising informational asymmetry costs faced by banks during the crisis period (adverse selection and moral hazard) have increased the cost of lending (Clerides et al ., ).…”

Section: Lerner Indexmentioning

confidence: 97%

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Does Monopolistic Competition Exist in the Mena Region? Evidence From the Banking Sector

Polemis

2015

Bulletin of Econ Res

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The goal of this paper is to empirically assess the level of banking competition in selected Middle East and Northern African (MENA) countries. The analysis employs the estimation of a nonstructural indicator (H-statistic) introduced by Panzar and Rosse and draws upon a panel dataset of eight MENA countries (Algeria, Egypt, Israel, Jordan, Morocco, Oman, Saudi Arabia, and United Arab Emirates) over the period 1997-2012. The empirical findings are robust towards three different panel data econometric techniques (Ordinary Least Squares, Pooled Generalized Least Squares with Fixed Effects, and Generalized Method of Moments) and consistent with other similar studies, providing sufficient evidence in favour of a banking monopolistic competition regime. Furthermore, the estimation of three other alternative measures of competition (Lerner index, adjusted Lerner index, and conduct parameter) provides similar results, revealing that the banking sector in the MENA region is characterized by a low level of Significant Market Power (SMP). Overall, the analysis shows that, despite similarities in the process of financial regulatory reforms undertaken in the eight MENA countries, the observed competition levels of banks vary substantially, with Algeria and Morocco consistently outperforming the rest of the region.

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ALI = \frac{(Π_{i t} + T C_{i t}) - (M C_{i t} * Q_{i t})}{Π_{i t} + T C_{i t}}

Section: Lerner Indexmentioning

confidence: 97%

Section: Lerner Indexmentioning

confidence: 97%

Does Monopolistic Competition Exist in the Mena Region? Evidence From the Banking Sector

Polemis

2015

Bulletin of Econ Res

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“…We obtain estimates for the Lerner index from Clerides et al (2015). In this section, we replicate their approach for convenience.…”

Section: A4 Estimation Of Marginal Costmentioning

confidence: 99%

“…The variable z, which is the so-called smoothing parameter, is crucial for the identification of the model and must be a variable that is highly correlated with a2 and considerably varies by bank-year. Clerides et al (2015) propose using = + + , which is intuitive given the high potential correlation of input prices with the output elasticity of costs. We use the same approach and we also verify that using each input price separately yields similar results.…”

Section: A4 Estimation Of Marginal Costmentioning

confidence: 99%

Enforcement of banking regulation and the cost of borrowing

Deli

Delis

Hasan

et al. 2019

Journal of Banking & Finance

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We show that borrowing firms benefit substantially from important enforcement actions issued on U.S. banks for safety and soundness reasons. Using hand-collected data on such actions from the main three U.S. regulators and syndicated loan deals over the years 1997-2014, we find that enforcement actions decrease the total cost of borrowing by approximately 22 basis points (or $4.6 million interest for the average loan). We attribute our finding to a competitionreputation effect that forces banks to lower their cost of credit, irrespective of other changes in their business models after the enforcement action.

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“…Similarly, Mirzaei and Moore (2014) studied the determinants of banking competition across different income groups by using Boone Indicator (along with Lerner Index) as measure of competition for 146 countries over the period of 1999-2011. More recently, Clerides et al (2015) measured the degree of banking competition in terms of Boone Indicator (along with 3 The SCP paradigm assumes one-way causation from the market structure to performance. 4 For details, see Hall-Tideman (1967); Adelman (1969); Davies (1979); Kwoka (1985); and Rhoades (1995).…”

Section: Literature Reviewmentioning

confidence: 99%

Measuring Competition in the Banking Sector of Pakistan: An Application of Boone Indicator

Khan¹

2017

JISR-MSSE

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The banking sector of Pakistan has witnessed a notable transformation in its structure and business activities following the implementation of financial sector reforms since the early 1990s. Specifically, the reforms helped transform a repressed financial sector into a market oriented and sound financial sector, predominantly owned and managed by the private sector. How these developments have impacted competition among the banks is still an open question.This study attempts to answer this question with the application of a recent approach to measure competition: Boone indicator of competitiveness. This measure postulates that inefficient firms (banks) in a competitive environment are punished harshly, and there is an output reallocation from inefficient to efficient firms/banks. We have estimated elasticity of market share to marginal costs for 24 banks in Pakistan, using a balanced panel of bank level (annual) data for the year 1996 to 2015. Marginal costs are obtained indirectly by first estimating a translog cost function using earning assets as an output, and cost of financial capital, physical capital and labor as inputs. The estimated Boone Indicator value of negative 0.31 is significant and suggests that inefficient banks have been losing their market share to efficient banks over the estimation period: a reflection of underlying competitive environment. Increasing value of Boone indicator (in absolute terms) over the period of study suggests that competition among the banks in Pakistan has increased over time.

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A New Data Set On Competition In National Banking Markets

Cited by 95 publications

References 39 publications

Does Monopolistic Competition Exist in the Mena Region? Evidence From the Banking Sector

Does Monopolistic Competition Exist in the Mena Region? Evidence From the Banking Sector

Enforcement of banking regulation and the cost of borrowing

Measuring Competition in the Banking Sector of Pakistan: An Application of Boone Indicator

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