Bank competition efficiency in Europe: A frontier approach

Wilko Bolt, David Humphrey*

*Corresponding author for this work

Research output: Contribution to JournalArticleAcademicpeer-review

Abstract

There are numerous ways to indicate the degree of banking competition across countries. Antitrust authorities rely on the structure-conduct-performance paradigm while academics prefer price mark-ups (Lerner index) or correlations of input costs with output prices (H-statistic). These measures are not always strongly correlated within or across countries. Frontier efficiency analysis is used to devise an alternative indicator of competition and rank European countries by their dispersion from a " competition frontier" The frontier is determined by how well payment and other costs explain variations in loan-deposit rate spread and non-interest activity revenues. Overall, differences in competition appear to be small.

Original languageEnglish
Pages (from-to)1808-1817
Number of pages10
JournalJournal of Banking and Finance
Volume34
Issue number8
DOIs
Publication statusPublished - Aug 2010

Keywords

  • Bank competition
  • European banks
  • Frontier analysis

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