What Drives Bank Competition? Some International Evidence

By Stijn Claessens, Luc Laeven. 2003

1,603 citations recorded by the source corpus.

Using bank-level data, we 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. We then relate this competitiveness measure to indicators of countries' banking system structures and regulatory regimes. We find systems with greater foreign bank entry and fewer entry and activity restrictions to be more competitive. We find no evidence that our competitiveness measure negatively relates to banking system concentration. Our findings confirm that contestability determines effective competition especially by allowing (foreign) bank entry and reducing activity restrictions on banks.

Subfields: Accounting, Finance, Strategy and Management

View Paper: https://www.semanticscholar.org/paper/f3ecd1563a26e97e50ff90e3ff8ed5c0e1f2ccfd

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Citations in the corpus

The impacts of product market competition on the quantity and quality of voluntary disclosures (2010, background): “The above model shares a similar logic to the one in Claessens and Laeven (2004), which estimates H-statistics for banking industries.”
Financial Globalization: A Reappraisal (2009, background): “3 Indeed, the fact that the actual volumes of such flows don’t come anywhere near what might be predicted by neoclassical growth models has been characterized as a puzzle by Lucas (1990), with many subsequent papers trying to resolve this puzzle.”
Financial liberalization and bank risk-taking: International evidence (2014, background): “Claessens and Laeven (2004) find banking systems with greater foreign bank entry and fewer entry and activity restrictions to be more competitive.”
Bank Competition and Financial Stability : Friends or Foes? (2008, methodology): “Another important issue for policy makers, though not covered in the previous sections, is foreign bank entry.9 Claessens and Laeven (2004) show that foreign bank participation is an important dimension of competition in the banking system.”
The relationship between banking market competition and risk-taking: Do size and capitalization matter? (2012, background): “Claessens and Laeven (2004), for example, that find a positive relation between concentration and competition; Shaffer and DiSalvo (1994) that find a high degree of banking competition in a small Pennsylvania county, even though the market structure was a duopoly; Maudos and Guevara (2007) that…”
A New Data Set On Competition In National Banking Markets (2015, neutral): “The related literature follows a similar approach (e.g., Delis, 2012; Claessens and Laeven, 2004).”
Financial Institutions and Markets Across Countries and Over Time - Data and Analysis (2009, neutral): “While concentration is often seen as indicator of competitiveness of a banking system, recent evidence has shown a very low correlation with other measures of banking competitiveness (Claessens and Laeven, 2004).”
Banking Competition and Efficiency: A Micro-Data Analysis on the Czech Banking Industry (2008, background): “Also, according to Diamond (1984), banks have a comparative advantage in the ex post monitoring of borrowers, in comparison to investors, because of the existence of economies of scale resulting from their role as the delegated monitor.”
Bank margins and profits in a world of negative rates (2019, methodology): “al, 2016; Kandrac and Schulsche, 2016; Rodnyanski and Darmouni, 2017; Chakraborty et. al, 2017), were conducted at the same time as NIRP, we include variables to account for these effects. Inline with Gambacorta et al. (2014), Lambert and Ueda (2014), and Alessandri and Nelson (2015) we employ the l”