The nexus between competition and efficiency: The European banking industries experience

Andrieş, Alin Marius; Căpraru, Bogdan

doi:10.1016/j.ibusrev.2013.09.004

Cited by 63 publications

(44 citation statements)

References 81 publications

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“…Employing an industrial organization-based approach to large data sets for European and U.S. banks, Schaeck and Čihák (2008) use Granger causality tests to establish the link between bank competition and profit efficiency measures, and demonstrate that high competition (or lower market power) does indeed increase bank efficiency. A later study on the evolution and convergence of competition in 27 banking systems of European Union for the period of 2004 to 2010 confirms the competition-efficiency hypothesis in terms of cost and profit efficiency, which states that an increase in banking competition levels would bring an increase in the efficiency level of banks (Andrieş & Căpraru, 2014).…”

Section: Bank Competition and Efficiencymentioning

confidence: 68%

Bank Competition, Efficiency, and Stability in Macau

Xia

Lei²,

Liang³

2019

AFR

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Macau has the uppermost population density and the fourth-highest GDP per capita in the world. Macau’s banking system is regarded as one of the most important indicators of Macau’s macroeconomic growth and stability during its transformation into a wealthy and modern metropolis. In this study, we use a sample of 26 banks to explore the relationship of bank competition, efficiency and stability in Macau from its return to China in 1999 to 2016. Our results demonstrate that bank competition does cause efficiency in Macau throughout the study period. We also find indications of a positive but not significant connection between bank market power and bank fragility including income volatility and insolvency risk. Moreover, this study finds no evidence that the size of operations proxied by total bank loans and total assets would impact bank efficiency, indicating that economies of scale or bank market share don’t necessarily bring about efficiency in Macau. Our evidence contributes to the literature by being the first to thoroughly examine the relation of bank competition, efficiency and stability in Macau. The findings provide meaningful implications to the practitioners and policymakers to make sound decisions accordingly, especially to closely monitor and maintain a proper level of competition in Macau’s banking sector.

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Section: Bank Competition and Efficiencymentioning

confidence: 68%

Bank Competition, Efficiency, and Stability in Macau

Xia

Lei²,

Liang³

2019

AFR

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“…Similarly, Casu and Girardone (2010) found evidence to suggest that the efficiency of EU banks converges towards an EU average which is due to a 'lagging' effect and not a 'catching up' effect. Similarly, Andrieş and Căpraru (2014) also found evidence to conclude that convergence of competition exists in European banking industries. Wild (2016) also found evidence of convergence of efficiency, equity to total assets and z-scores of banks in the Eurozone.…”

Section: Convergencementioning

confidence: 86%

“…In the context of banks, convergence theory suggests that less profitable banks grow faster than profitable banks. Although the concept has been applied in the macroeconomic context to examine the growth of economies, or regions, there are emerging studies that are examining the convergence of bank performance (Andrieş & Căpraru, 2014). In a study on bank holding companies in the U.S., Fung (2006) found no evidence for absolute convergence but rather conditional convergence.…”

Section: Convergencementioning

confidence: 99%

Determinants and convergence of income diversification in Ghanaian banks

Duho

Onumah

Asare

2020

jrems

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The study explores the determinants of income diversification, as well as, test for the existence of beta-convergence and sigma-convergence among Ghanaian banks. The study utilizes a dataset of 32 banks covering the periods 2000 to 2017. The panel corrected standard error ordinary least squares, fixed effects and system generalized methods of moments have been used. Both beta-convergence and sigma-convergence exist among Ghanaian banks; suggesting the presence of the catch-up effect and similarity of strategy over time. The risk profile and risk portfolio of banks affect their diversification strategy. Banks that are faced with high insolvency risk and liquidity risk tend to diversify while banks that are faced with low credit risk tend to diversify. Stable banks tend to adopt a diversification strategy even when they are exposed to credit risk. Network embeddedness drives diversification strategy. The implications of the study for practice, policy, and future research have been discussed.

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“…In such a market, as suggested by the theory of monopolistic competition, firms have little to no control over the market price and, as such, compete on the basis of product differentiation. Consequently, to improve profitability and to compete in the market, managers have to resort to strategies like mergers, acquisitions, improving operational cost efficiency, asset and liabilities diversification, and increasing non-interest revenue (Andrieş and Căpraru 2014). There are many other notable studies on competition in banking (for example, Yüksel et al 2016Yüksel et al , 2018Dinçer and Yüksel 2018;Dinçer et al 2019).…”

Section: Theory and Literature Reviewmentioning

confidence: 99%

Competition in the Indian Banking Sector: A Panel Data Approach

Liu

Meng

et al. 2019

JRFM

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The paper aims to assess the level of competition in the Indian banking sector overall as well as within the three groups of banks: foreign owned, state owned (public sector), and privately owned. We use panel data for the period from 2005–2018. We found that the overall competition in the Indian banking sector is strong, although there are differences by type of bank ownership. The Indian banking market continues to be characterized by monopolistic competition. The various policy measures taken by the Indian government in recent years appear to have helped boost competition. A policy suggestion would be to further liberalize the banking sector for foreign investment.

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The nexus between competition and efficiency: The European banking industries experience

Cited by 63 publications

References 81 publications

Bank Competition, Efficiency, and Stability in Macau

Bank Competition, Efficiency, and Stability in Macau

Determinants and convergence of income diversification in Ghanaian banks

Competition in the Indian Banking Sector: A Panel Data Approach

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