What Drives Bank Competition? Some International Evidence

What Drives Bank Competition? Some International Evidence

Using bank-level data, the authors apply the Panzar and Rosse (1987) methodology to estimate the extent to which changes in input prices are reflected in revenues earned by specific banks in 50 countries' banking systems. They then relate this...

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Bibliographic Details
Main Authors:	Claessens, Stijn, Laeven, Luc
Format:	Policy Research Working Paper
Language:	English en_US
Published:	World Bank, Washington, DC 2014
Subjects:	BANKING SYSTEMS INPUTS REVENUE SOURCES PRICE INDEXES COMPETITIVENESS FOREIGN BANKS PERFORMANCE INDICATORS BANKING REGULATIONS CONTESTABILITY ASSETS BANK HOLDING COMPANIES BANK LENDING BANK REGULATION BANKING INDUSTRY BANKING SECTOR BANKING SERVICES BANKING STRUCTURE BANKING SYSTEM BANKS CAPITAL MARKETS CAPITALIZATION COLLUSION COMMERCIAL BANKS COMPETITION POLICY COMPETITIVE PRICE CONCENTRATION INDEXES CONSOLIDATION CONTESTABILITY CONTESTABLE MARKETS COOPERATIVE BANKS DEPOSITS DEREGULATION DEVELOPED COUNTRIES ECONOMIC DEVELOPMENT ECONOMIC GROWTH ECONOMIC STABILITY ELASTICITIES ELASTICITY EMPIRICAL RESEARCH EMPIRICAL STUDIES EQUILIBRIUM EXPENDITURES FINANCIAL INSTITUTIONS FINANCIAL INTERMEDIATION FINANCIAL MARKETS FINANCIAL SECTOR FINANCIAL SERVICES FINANCIAL SYSTEMS GDP GDP PER CAPITA HOME MARKET IMPERFECT COMPETITION INEFFICIENCY INFLATION INFLATION RATE INPUT PRICES INSURANCE INSURANCE INDUSTRY INSURANCE PREMIUMS INTEREST EXPENSE INTEREST RATE INTEREST RATES MARGINAL COSTS MARGINAL REVENUE MARKET CONCENTRATION MARKET EQUILIBRIUM MARKET POWER MARKET STRUCTURE MONOPOLISTIC COMPETITION MONOPOLY NET INTEREST MARGIN OLIGOPOLY PER CAPITA INCOME PERFECT COMPETITION PRODUCTION FUNCTION PROFITABILITY PROPERTY RIGHTS REGULATORY REGIMES RETURN ON ASSETS SAVINGS SAVINGS BANKS SECURITIES SECURITIES MARKETS SMALL BANKS STOCK MARKETS SUPERVISORY AGENCIES TAXATION TECHNOLOGICAL PROGRESS TOTAL REVENUE TRANSITION ECONOMIES ASSETS
Online Access:	http://documents.worldbank.org/curated/en/2003/08/2494638/drives-bank-competition-some-international-evidence http://hdl.handle.net/10986/18121

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Summary:	Using bank-level data, the authors apply the Panzar and Rosse (1987) methodology to estimate the extent to which changes in input prices are reflected in revenues earned by specific banks in 50 countries' banking systems. They then relate this competitiveness measure to indicators of countries' banking system structures and regulatory regimes. The authors find systems with greater foreign bank entry and fewer entry and activity restrictions to be more competitive. They find no evidence that the competitiveness measure negatively relates to banking system concentration. Their findings confirm that contestability determines effective competition, especially by allowing (foreign) bank entry and reducing activity restrictions on banks.

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