Determinants of Market Power in the Peruvian Regulated Microfinance Sector

Aguilar, Giovanna; Portilla, Jhonatan

doi:10.1007/s10842-019-00318-z

Cited by 7 publications

(4 citation statements)

References 64 publications

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“…Greater cost efficiency has greater market power, thus fulfilling the efficient structure (ES) hypothesis. This finding in line with Fernandez de Guevara et al (2005), Aguilar and Portilla (2020), Chaffai and Coccorese (2023). Besides that, more stable banks also lead to greater market power, which is supported by the SCP paradigm in terms of banking where performance (bank financial stability) might have impact on structure (the degree of bank competition).…”

Section: Jfep 164supporting

confidence: 78%

Banking competition in Indonesia: does Fintech lending matters?

Dilla,

Shahrin,

Zainir

2024

JFEP

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Purpose This paper aims to examine how the rise of financial technology (Fintech) lending affects bank competition. Moreover, this study also identifies the structure of Indonesian commercial banking sector and the different behaviour of competition among bank groups (based on their size, type and ownership) and the joint impact of COVID-19 due to the rise of Fintech lending. Design/methodology/approach Using an unbalanced panel data set of 118 commercial banks in Indonesia over the period 2018–2022, both static panel and 2SLS/IV data analysis were used and found that random effect model is the best model. Findings The results show that the Indonesian commercial banking sector can be considered as monopolistic competition. Moreover, using the Lerner index reveals that the entry of the Fintech lenders increases bank competition. Furthermore, there were different responses to the impact of Fintech lending on bank competition among state-owned banks, private banks, regional development banks and foreign banks. Greater efficiency and stability lead to greater market power. In the meantime, higher level of asset growth, capitalisation and cost-to-income ratio increase the competition. Lastly, higher bank credit growth and lower inflation boost overall bank competitiveness. Practical implications This study highlights some policy recommendations for commercial banks to be aware of the coming of Fintech lenders because they have started to increase the market competition. The government should create a more collaborative ecosystem between banks and Fintech lending to anticipate unhealthy competition. Originality/value This study will contribute to the literature by expanding the determinants of bank competition by considering the rise of Fintech lending in the market.

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Section: Jfep 164supporting

confidence: 78%

Banking competition in Indonesia: does Fintech lending matters?

Dilla,

Shahrin,

Zainir

2024

JFEP

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“…The coefficient of INEFF is negative and significant (at the 10% level in Model 2): the evidence is that more efficient banks (i.e. those with lower operating inefficiency) enjoy higher market power (Fernandez de Guevara et al, 2005;Ayadi et al, 2010;Cubillas and Suarez, 2013;Efthyvoulou and Yildirim, 2014;Ghosh, 2018;Aguilar and Portilla, 2020), possibly thanks to better management or superior production technologies. We therefore get support to the efficient structure hypothesis (Demsetz, 1973), according to which improving efficiency leads to higher profits through preventing competition from other banks (Fernandez de Guevara and Maudos, 2007, p. 291).…”

Section: Insert Figure 1 About Herementioning

confidence: 97%

“…Their estimated Lerner indices show to be positively associated to operational efficiency, profitability, the share of non-interest income, capitalization, and GDP growth, while negatively related to the incidence of bad loans. Aguilar and Portilla (2020) study the evolution and determinants of market power in Peru's regulated microfinance sector from January 2003 to June 2016 by means of both a conventional and an efficiency-adjusted Lerner index. Their main evidence is that both indices decreased until 2014 and then significantly grew, and that the largest companies as well as the more efficient ones are characterized by greater market power.…”

Section: Fernandez Dementioning

confidence: 99%

What affects bank market power in the euro area? A country-level structural model approach

Coccorese

Girardone

Shaffer

2021

Journal of International Money and Finance

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“…The coefficient of INEFF is negative and significant (at the 10% level in Model 2): the evidence is that more efficient banks (i.e. those with lower operating inefficiency) enjoy higher market power (Fernandez de Guevara et al, 2005;Ayadi et al, 2010;Cubillas and Suarez, 2013;Efthyvoulou and Yildirim, 2014;Ghosh, 2018;Aguilar and Portilla, 2020), reasonably thanks to better management or superior production technologies. We therefore get support to the efficient structure hypothesis, according to which improving efficiency leads to higher profits through preventing competition from other banks (Fernandez de Guevara and Maudos, 2007, p. 291).…”

Section: Insert Figure 1 About Herementioning

confidence: 97%

What Affects Bank Market Power in the Euro Area? A Structural Model Approach

2021

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In this study we explore market power in 13 EU banking sectors for the years 2007 to 2019 by estimating a structural model with demand and supply equations, where the mark-up of price over marginal cost is parameterized as a measure of banks' conduct that depends on selected factors. Our evidence indicates that EU banks enjoy a significant degree of market power, which shows a decreasing trend over time and some difference across countries. More competition is associated with higher bank density, lower bank capitalization, more efficient and stable banking systems, and better macroeconomic conditions. Finally, a clear convergence pattern emerges in the behaviour of EU banks.

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Determinants of Market Power in the Peruvian Regulated Microfinance Sector

Cited by 7 publications

References 64 publications

Banking competition in Indonesia: does Fintech lending matters?

Banking competition in Indonesia: does Fintech lending matters?

What affects bank market power in the euro area? A country-level structural model approach

What Affects Bank Market Power in the Euro Area? A Structural Model Approach

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