Delis, Manthos D and Staikouras, Christos and Varlagas, Panagiotis (2008): On the measurement of market power in the banking industry. Published in: Journal of Business Finance and Accounting , Vol. 35, No. 7 (September 2008): pp. 1023-1047.
Preview |
PDF
MPRA_paper_14038.pdf Download (405kB) | Preview |
Abstract
This paper compares the estimates of the two most widely used non-structural models for market power measurement in banking, namely the conduct parameter method and the revenue test, as applied to a panel of Greek banks over the period 1993-2004. We also propose a dynamic reformulation of these models within a panel data context, in order to address possible statistical problems associated with the dynamic nature of bank-level data. The results suggest that both static methods provide lower estimates of market power relative to their dynamic counterparts. Therefore, the inclusion of some dynamics in the models, even though it increased estimation complexity, helped to reveal some collusive behavior of banks.
Item Type: | MPRA Paper |
---|---|
Original Title: | On the measurement of market power in the banking industry |
Language: | English |
Keywords: | Market power estimation; Conduct parameter method; Revenue test; Greek banking sector |
Subjects: | L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance > L10 - General P - Economic Systems > P2 - Socialist Systems and Transitional Economies > P20 - General G - Financial Economics > G2 - Financial Institutions and Services > G21 - Banks ; Depository Institutions ; Micro Finance Institutions ; Mortgages |
Item ID: | 14038 |
Depositing User: | Manthos Delis |
Date Deposited: | 13 Mar 2009 06:15 |
Last Modified: | 22 Dec 2021 07:08 |
References: | Amemiya, T., 1977. The maximum likelihood estimator and the nonlinear three-stage least squares estimator in the General Nonlinear Simultaneous Equation Model. Econometrica 45, 955-968. Arellano, M., Bond, S., 1991. Some tests of specification for panel data: Monte Carlo evidence and an application to employment equations. Review of Economic Studies 58, 277-297. Arellano, M., Bover, O., 1995. Another look at the instrumental variables estimation of error-component models. Journal of Econometrics 68, 29-51. Baltagi, B., 2005. Econometric Analysis of Panel Data, 3rd edition. John Wiley & Sons, Chichester. Bank of Greece, 2005. Annual Report for 2004. Bank of Greece (in Greek). Bank of Greece, 2006. Annual Report for 2005. Bank of Greece (in Greek). Barajas, A., Steiner, R., Salazar, N., 2000. The impact of liberalization and foreign investment in Colombia’s financial sector. Journal of Development Economics 63, 157-196. Barnett, W.A., Lee, Y.W., 1985. The global properties of the Minflex Laurent, Generalized Leontief and translog flexible functional forms. Econometrica 53, 1421-1438. Berger, A, Bonime, S., Covitz, D., Hancock, D., 2000. Why are bank profits so persistent? The roles of product market competition, informational opacity, and regional/macroeconomic shocks. Journal of Banking and Finance 24, 1203-1235. Bikker, J., Haaf, K., 2002. Competition, concentration and their relationship: An empirical analysis of the banking industry. Journal of Banking and Finance 26, 2191-2214. Binder, M., Hsiao, C., Pesaran, H., 2003. Estimation and inference in short panel vector autoregressions with unit roots and cointegration, Mimeo. Blundell, R., Bond, S., 1998. Initial conditions and moment restrictions in dynamic panel data models. Journal of Econometrics 87, 115-143. Bond, S., 2002. Dynamic panel data models: A guide to microdata methods and practice. Portuguese Economic Journal 1, 141-162. Bourke, P., 1989. Concentration and other determinants of bank profitability in Europe, North America and Australia. Journal of Banking and Finance 13, 65-79. Bresnahan, T., 1982. The oligopoly solution concept is identified. Economics Letters 10, 87-92. Bresnahan, T., 1989. Empirical studies of industries with market power. Chapter 17 in Handbook of Industrial Organization (editors: Richard Schmalensee, Robert Willig), Vol. 2, Elsevier Science Publications, 1011-1057. Carlton, D., Perloff, J., 2005. Modern Industrial Organization. Addison-Wesley, 4th Edition. Corts, K.S., 1999. Conduct parameters and the measurement of market power. Journal of Econometrics 88, 227-250. De Bandt, O., Davis, P., 2000. Competition, contestability and market structure in European banking sectors on the eve of EMU. Journal of Banking and Finance 24, 1045-1066. European Central Bank, 2004. Report on EU banking structure. European Central Bank, November. European Central Bank, 2005. Banking structures in the new EU member states. European Central Bank, January. Evanoff, D., Fortier, D., 1988. Re-evaluation of the structure-conduct-performance paradigm in banking. Journal of Financial Service Research 1, 277-294. Gibson, H., 2005. Greek banking profitability: Recent developments. Bank of Greece, Economic Bulletin 24, 7-26. Hansen, L., 1982. Large sample properties of generalized method of moments estimators. Econometrica 50, 1029-1054. Hondroyiannis, G., Lolos, S., Papapetrou, E., 1999. Assessing competitive conditions in the Greek banking system. Journal of International Financial Markets, Institutions and Money 9, 377-391. Hughes, J.P., Mester, L.J., 1998. Bank capitalization and cost: Evidence of scale economies in risk management and signaling. Review of Economics and Statistics 80, 314-325. Iwata, G., 1974. Measurement of conjectural variations in oligopoly. Econometrica 42, 947-966. Kennedy, P., 2003. A Guide to Econometrics, fifth edition. Blackwell Publishers, Oxford. Lau, L., 1982. On identifying the degree of competitiveness from industry price and output data. Economics Letters 10, 93-99. Ljung, G., Box, G., 1979. On measure of lack of fit in time series models. Biometrika 66, 265-270. Molyneux, P., Lloyd-Williams, M., Thornton, J., 1996. Competition and market contestability in Japanese commercial banking. Journal of Economics and Business 48, 33-45. Panzar, J., Rosse, J., 1987. Testing for "monopoly" equilibrium. Journal of Industrial Economics 35, 443-456. Rosse, J. N., Panzar, J. C., 1977. Chamberlin vs. Robinson: An empirical test for monopoly rents. Bell Laboratories, Economic Discussion Papers, No. 90. Shaffer, S., DiSalvo, J., 1994. Conduct in a banking duopoly. Journal of Banking and Finance 18, 1063-1082. Shaffer, S., 1982. A non-structural test for competition in financial markets. Proceedings of a Conference on Bank Structure and Competition, Federal Reserve Bank of Chicago, 225-243. Shaffer, S., 1989. Competition in the U.S. banking industry. Economics Letters 29, 321-323. Shaffer, S., 1993. A test of competition in Canadian banking. Journal of Money, Credit, and Banking 25, 49-61. Shaffer, S., 1999. The competitive impact of disclosure requirements in the credit card industry. Journal of Regulatory Economics 15, 183-198. Shaffer, S., 2004. Patterns of competition in banking. Journal of Economics and Business 56, 287-313. Sjoberg, P., 2004. Market power and performance in Swedish banking. Department of Economics, Goteborg University. Staikouras, C., Koutsomanoli-Fillipaki A., 2006. Competition and concentration in the new European banking landscape. European Financial Management 12, 443–482. Steen, F., Salvanes, K., 1999. Testing for market power using a dynamic oligopoly model. International Journal of Industrial Organization 17, 147-177. Toolsema, L., 2002. Competition in the Dutch consumer credit market. Journal of Banking and Finance 26, 2215-2229. Uchida, H. and Tsutsui, Y., 2005. Has competition in the Japanese banking sector improved? Journal of Banking and Finance 29, 419-439. Vesala, J., 1995. Testing for competition in banking: Behavioral evidence from Finland. Bank of Finland Studies, E1. Windmeijer, F., 2000. A finite sample correction for the variance of linear two-step GMM estimators. The Institute for Fiscal Studies, Working Paper W00/19. Yildirim, S., Philippatos, G., 2002. Competition and contestability in Central and Eastern European banking markets. University of Tennessee, Working Paper. |
URI: | https://mpra.ub.uni-muenchen.de/id/eprint/14038 |