Market power in CEE banking sectors and the impact of the global financial crisis

Abstract

Article available under the terms of the CC-BY-NC-ND licence (https://creativecommons.org/licenses/by-nc-nd/4.0/) eprints@whiterose.ac.uk https://eprints.whiterose.ac.uk/ Reuse Unless indicated otherwise, fulltext items are protected by copyright with all rights reserved. The copyright exception in section 29 of the Copyright, Designs and Patents Act 1988 allows the making of a single copy solely for the purpose of non-commercial research or private study within the limits of fair dealing. The publisher or other rights-holder may allow further reproduction and re-use of this version -refer to the White Rose Research Online record for this item. Where records identify the publisher as the copyright holder, users can verify any specific terms of use on the publisher's website. TakedownIf you consider content in White Rose Research Online to be in breach of UK law, please notify us by emailing eprints@whiterose.ac.uk including the URL of the record and the reason for the withdrawal request. AbstractThe aim of this study is to undertake an up-to-date assessment of market power in Central and Eastern European banking markets and explore how the global financial crisis has affected market power and what has been the impact of foreign ownership. Three main results emerge. First, while there is some convergence in country-level market power during the pre-crisis period, the onset of the global crisis has put an end to this process. Second, bank-level market power appears to vary significantly with respect to ownership characteristics. Third, asset quality and capitalization affect differently the margins in the pre-crisis and the crisis periods. While in the pre-crisis period the impacts are similar for all banks regardless of ownership status, in the crisis period non-performing loans have a negative effect and capitalization a positive effect only for domestically-owned banks.

Financial Development and Economic Growth: The Role of Foreign-Owned Banks in CESEE Countries

“…Third, there have been analyses on the performance of banks and the impact of foreign ownership (e.g., [40][41][42][43][44]. Fourth, market competition and the impact of foreign-owned banks have also been in focus (e.g., [45,46]). …”

Influence of internet and social media presence on small, local banks’ market power

“…The array of factors influencing market power, at least under certain circumstances, is vast and includes bank size, business model, ownership, and efficiency as well as macroeconomic factors. Efthyvoulou and Yildirim (2014) analyse the banking sectors of 17 Central and East European countries and observe that the level of market power and competitive conditions vary significantly across countries with bank ownership characteristics. Turk Ariss (2010) performs a broad analysis of market power using a conventional, an efficiency-adjusted and a funding-adjusted Lerner measure in 60 developing countries.…”

“…Following the literature, total assets account for the bank's aggregate product (e.g. Angelini & Cetorelli, 2003;Efthyvoulou & Yildirim, 2014;Hryckiewicz & Kozłowski, 2015;Turk Ariss, 2010). MC is derived from a translog cost function:…”

“…Finally, ɛ is an error term. Following Poghosyan and Poghosyan (2010), Efthyvoulou and Yildirim (2014) and Hryckiewicz and Kozłowski (2015), total costs and all terms involving the input prices are deflated by W 3 to automatically satisfy the restriction of linear homogeneity for input prices. We estimate the coefficients of the translog function from Equation (2) using a randomeffects GLS procedure.…”

“…Nevertheless, it is also noteworthy that values below zero are theoretically possible. This suggests that the bank's marginal cost exceeds price and as a result, the bank is experiencing losses (Efthyvoulou & Yildirim, 2014;Hryckiewicz & Kozłowski, 2015). Panel A of Table 3 presents the distribution of the estimated Lerner indexes in individual years and in the entire sample.…”