Competition in banking: measurement and interpretation

Hong, Liu; Molyneux, Philip; Wilson, John O. S.

doi:10.4337/9780857936097.00016

Cited by 22 publications

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“…Following e.g. Liu, Molyneux, and Wilson () and Schaeck and Cihak (), we calculate the elasticity of profits ( π ) to marginal costs by country and year as shown in equation .

l n π_{i t} = α + β l n m c_{i t} + e_{i t}

where the marginal cost ( mc ) is calculated using a translog cost function (see Equation ).…”

Section: Discussion Of Resultsmentioning

confidence: 99%

“…Results are reported in Table and are consistent with the results reported in Table in only two cases (CAR and σROA). Although the Boone indicator has many appealing qualities it often underperforms in comparative tests of banking market conditions hence results should be treated with some caution (Liu et al., ; Schiersch & Schmidt‐Ehmcke, ). One possible reason is that the Boone makes critical assumptions relative to firm size and to market definition.…”

Section: Discussion Of Resultsmentioning

confidence: 99%

“…Following e.g. Liu, Molyneux, and Wilson (2013) and Schaeck and Cihak (2014), we calculate the elasticity of profits ( ) to marginal costs by country and year as shown in equation (7).…”

Section: Robustness Checkmentioning

confidence: 99%

“…Koetter, Kolari, and Spierdijk () demonstrates that the Lerner index is biased when profit inefficiencies are ignored, based on a study focusing on the US banking industry.…”

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confidence: 99%

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Competition and risk‐taking in investment banking

et al. 2019

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How does competition affect the investment banking business and the risks individual institutions are exposed to? Using a large sample of investment banks operating in seven developed economies over 1997–2014, we apply a panel VAR model to examine the relationships between competition and risk without assuming any a priori restrictions. Our main finding is that investment banks’ higher risk exposure, measured as a long‐term capital‐at‐risk and return volatility, was facilitated by greater competitive pressures for both boutique investment banks and full‐service investment banks. Overall, we find some evidence that more competition leads to more fragility before and during the recent financial crisis.

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“…Following e.g. Liu, Molyneux, and Wilson () and Schaeck and Cihak (), we calculate the elasticity of profits ( π ) to marginal costs by country and year as shown in equation .

l n π_{i t} = α + β l n m c_{i t} + e_{i t}

where the marginal cost ( mc ) is calculated using a translog cost function (see Equation ).…”

Section: Discussion Of Resultsmentioning

confidence: 99%

Section: Discussion Of Resultsmentioning

confidence: 99%

“…Following e.g. Liu, Molyneux, and Wilson (2013) and Schaeck and Cihak (2014), we calculate the elasticity of profits ( ) to marginal costs by country and year as shown in equation (7).…”

Section: Robustness Checkmentioning

confidence: 99%

“…Koetter, Kolari, and Spierdijk () demonstrates that the Lerner index is biased when profit inefficiencies are ignored, based on a study focusing on the US banking industry.…”

mentioning

confidence: 99%

See 2 more Smart Citations

Competition and risk‐taking in investment banking

et al. 2019

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“…Liu, Molyneux, and Wilson (2013a) confirm the positive relation between competition and bank stability among regional banks in 11 European countries. Liu, Molyneux, and Wilson (2013b) examine the competition of nine EU banking markets by using different competition measures, and conclude that different measures can yield different outcomes.…”

Section: Panzar-rosse Modelmentioning

confidence: 99%

Financial Institutions in the Global Financial Crisis

2018

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The single supervisory mechanism: Competitive implications for the banking sectors in the euro area

Okolelova

Bikker

2020

Int. J Fin Econ

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This paper explores possible impact of the SSM's launch on the market power of banks in the large euro area economies. We employ the Lerner index and the Boone estimator, non-structural measures that capture different aspects of competition. Using the results of the Lerner index, we find evidence of the significant decrease in market power for the ECB supervised entities in Austria, France, Germany and Spain. In a similar vein, the Boone indicator points towards an increase in competition among significant supervised entities of Austria, France, Germany, Italy and Spain. The evidence on changes for the total banking sector are mixed, whereas no significant effect is found for the banks remaining under national supervision. We do not find any support for significant increases in the market power of banks in Italy or Spain, suggesting that large increases in concentration do not necessarily result in anticompetitive conduct.

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Competition in banking: measurement and interpretation

Cited by 22 publications

References 0 publications

Competition and risk‐taking in investment banking

Competition and risk‐taking in investment banking

Financial Institutions in the Global Financial Crisis

The single supervisory mechanism: Competitive implications for the banking sectors in the euro area

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