Bank competition in India: revisiting the application of Panzar–Rosse model

Rakshit, Bijoy; Bardhan, Samaresh

doi:10.1108/mf-09-2019-0457

Cited by 7 publications

(11 citation statements)

References 48 publications

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“…The first regressor LC revealed that a high labor cost paid by banks to their employees increases the bank's interest income. This result is harmonious to the prior empirical findings of Akthan and Mosood (2010); Biekpe (2011); Gajurel and Pradhan (2012); Neupane (2016); Fosu (2013); Simatele (2015); Apergis (2015); Sakar and Sensharma (2016); Barros and Mendes (2016); Tan (2016);Tihir et al (2016); and Rakshit and Bardhan (2020). This empirical evidence elucidated that a higher level of financial benefit increases employees' morale, dedication, and loyalty to the organization and increase the overall efficiency and productivity of the banks.…”

Section: Discussionsupporting

confidence: 88%

“…The long-run market equilibrium finding was matching to the outcomes obtained by Gajurel and Pradhan (2012) and Neupane (2016) for Nepalese banking. However, this result is incompatible with the study of Rakshit and Bardhan (2020) in the Indian context. Further "The market equilibrium test is conducted in order to draw inference on the impact of the explanatory variables on ROA" (Rakshit & Bardhan, 2020).…”

Section: Equilibrium Test Results and Sensitivity Analysiscontrasting

confidence: 57%

“…However, this result is incompatible with the study of Rakshit and Bardhan (2020) in the Indian context. Further "The market equilibrium test is conducted in order to draw inference on the impact of the explanatory variables on ROA" (Rakshit & Bardhan, 2020). The positive slops of LC and CC (.273 and .388) show that LC and CC have a direct effect on ROA in the long-run.…”

Section: Equilibrium Test Results and Sensitivity Analysiscontrasting

confidence: 57%

“…The structural model to measure bank competition has certain limitations. The non-structural P-R model is mostly used by the researcher "due to its modest data requirement, simple econometric specification, and validation of long-run market equilibrium" (Rakshit & Bardhan, 2020). A large body of studies used this model to ascertain the degree of bank competition in our neighboring countries.…”

Section: Literature Reviewmentioning

confidence: 99%

“…Also, a higher level of competition enhances the quality and menu of service products, increase market share and improves the overall efficiency of the banks. It reduces the operating costs, enhances customers' service, and is improve the overall performance of the banking industry in the long-run (Homma et al, 2014;Misra & Arrawatia, 2015;Rakshit & Bardhan, 2020). The fierce competition in the banking sector also opens the door to diversify assets from traditional loan business to non-traditional fee and commission generating assets.…”

Section: Introductionmentioning

confidence: 99%

See 4 more Smart Citations

Assessing Bank Competition in Nepal Using Panzar-Rosse Model

Budhathoki¹,

Rai²,

Rai³

2020

JAFEB

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The purpose of this study is to assess the state of competition in Nepalese banking over the period from 2010 to 2019. This study employs panel data and a non-structural Panzar-Rosse model to measure the degree of competition in the Nepalese banking industry. The first reduced-form equation is applied to gauge competition, and the second model is used to test the long-run equilibrium in the banking market. The finding reveals that the Nepalese banking market is equilibrium in the long-run. It implies that the factor prices do not affect ROA in the long-run. The result of the H-statistic shows that the Nepalese banking system is operating under the state of perfect competition and is shifted from monopolistic competition to perfect competition. The reduced-form model reveals that the interest income is positive and significantly affected by factor prices. Similarly, the macroeconomic variable GDP growth is positively related to interest income. On the contrary, the bank's specific factors risk and the number of bank branches are inversely associated with the regressand. The outcomes of the study may be advantageous to the policymakers, especially to Nepal Rastra Bank to implement monetary policy and M&A policy for the stability and growth of the financial system of Nepal.

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Section: Discussionsupporting

confidence: 88%

Section: Equilibrium Test Results and Sensitivity Analysiscontrasting

confidence: 57%

Section: Equilibrium Test Results and Sensitivity Analysiscontrasting

confidence: 57%

Section: Literature Reviewmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

See 3 more Smart Citations

Assessing Bank Competition in Nepal Using Panzar-Rosse Model

Budhathoki¹,

Rai²,

Rai³

2020

JAFEB

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Why do bank customers switch? A systematic literature review

Ngau

Zins

Rengasamy

2023

IJBM

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PurposeThe digital transformation in the banking industry has brought about complexity and competitiveness which has made differentiation challenging for banks. Complemented by consumer empowerment through high accessibility of information on the internet, this has led to a phenomenon known as switching behavior. The purpose of this review is to examine the determinants governing switching behavior among bank customers. This review highlights the importance of research which looks beyond pre-adoption behavior by examining post-adoption behavior; what happens after initial technology acceptance.Design/methodology/approachThis review examines 44 journal articles researching switching behavior published between 1995 and 2022 in top journals. From a synthesis of literature, a conceptual framework for analysis and understanding switching behavior is presented.FindingsAlthough various scholars have investigated switching behavior among bank customers, there are few studies which provide a comprehensive review and research classifications in this area. This review classifies key determinants of switching behavior into socio-demographic factors, situational triggers, influential triggers and reactional triggers. Structural equation modelling is the most common research methodology utilized in reviewed articles. The literature review reveals that mediators and moderators are less commonly deployed compared to determinants. Findings also indicate switching behavior studies still lack theory-driven conceptual frameworks.Originality/valueThis paper is the first systematic literature review on switching behavior research among bank customers spanning across 28 years in top academic journals. It integrates insights from 44 relevant research papers through publication trends. This review identifies key research gaps and provides future research directions.

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Assessing the effects of cost, revenue and profit efficiency on bank performance: empirical evidence from Indian banking

Rakshit

2022

IJOA

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Purpose This paper aims to investigate the effects of cost, revenue and profit efficiency on bank profitability in an emerging economy such as India over the period 1997 to 2017. Additionally, this study examines the effect of efficiency on profitability across different ownership groups for a panel of 70 Indian commercial banks. Design/methodology/approach In the first stage, using stochastic frontier analysis, we estimate the efficiency scores of cost, revenue and profit over the examined period. In the second stage, this study uses the two-step system generalized-method of moments dynamic panel approach to investigate the impact of several efficiency measures on bank profitability. Findings Results estimated through and system generalized-method of moments indicate that a higher level of cost, revenue and efficiency significantly improves India's bank profitability. Regarding ownership groups, this study finds that the public sector banks are most cost-efficient compared to private and foreign banks. Other bank-specific, macroeconomic and institutional variables have played a significant role in determining bank profitability. Practical implications The findings of the study extend some important policy implications. In light of the rapid decline in bank profitability, banks should focus on increasing the efficiency of their operations. Improvement in profit, cost and revenue efficiency can ameliorate bank performance significantly. Profit efficiency that takes into account both cost and revenue efficiency should be maintained reasonably to prevent the declining pattern of bank profitability that the industry has witnessed over the years. Originality/value To the best of the author's knowledge, this study is a fresh piece of research that fulfils an urgent need of investigating the dynamics between bank efficiency and bank profitability in India. In an emerging economy like India, where the banking sector has witnessed substantial structural transformations over the past two decades, such study demands an immediate empirical investigation.

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Bank competition in India: revisiting the application of Panzar–Rosse model

Cited by 7 publications

References 48 publications

Assessing Bank Competition in Nepal Using Panzar-Rosse Model

Assessing Bank Competition in Nepal Using Panzar-Rosse Model

Why do bank customers switch? A systematic literature review

Assessing the effects of cost, revenue and profit efficiency on bank performance: empirical evidence from Indian banking

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