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Article
Publication date: 8 May 2009

Barbara Casu and Claudia Girardone

The purpose of this paper is to assess the outcome of European Union (EU) deregulation and competition policies on the competitive conditions of the main EU banking markets.

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Abstract

Purpose

The purpose of this paper is to assess the outcome of European Union (EU) deregulation and competition policies on the competitive conditions of the main EU banking markets.

Design/methodology/approach

After a review of deregulation and competitition policies in the EU banking industry, the degree of competition in the largest five EU banking markets using is tessted both structural (concentration ratios and Herfindahl‐Hirshman indices) and non‐structural (H‐statistics and Lerner index) approaches.

Findings

Results indicate that EU banking markets are becoming progressively more concentrated and that there is no evidence of an increase in competitive pressure. Country differences are also apparent thereby indicating that despite the sustained regulatory interventions, significant barriers to the integration of EU retail banking markets remain. In line with recent literature, the analysis also seems to provide further evidence that concentration is not necessarily a good proxy for competition.

Originality/value

Increased market concentration and its effects on competition are of relevance in a period of renewed EU regulatory efforts to remove the remaining barriers to the integration of financial markets. The evaluation of competitive conditions and market power in EU banking are therefore of interest to policy‐makers and regulators.

Details

Journal of Financial Regulation and Compliance, vol. 17 no. 2
Type: Research Article
ISSN: 1358-1988

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Article
Publication date: 13 February 2009

Claudia Girardone, John C. Nankervis and Ekaterini‐Fotini Velentza

This paper aims to compare the cost efficiencies across bank‐and market‐based EU countries for the different groups of commercial, savings and co‐operative banks; and between…

4219

Abstract

Purpose

This paper aims to compare the cost efficiencies across bank‐and market‐based EU countries for the different groups of commercial, savings and co‐operative banks; and between listed and non‐listed banking institutions. In addition, it attempts to determine any potential implications for bank efficiency originating from differences in financial structure.

Design/methodology/approach

Efficiency scores are estimated using the Battese and Coelli's time‐varying stochastic frontier approach. The classification of bank‐ and market‐based financial systems is based on the World Bank's Financial Structure Database.

Findings

On the whole the results reject the agency theory hypothesis that managers of privately‐owned banks are more cost efficient than those of mutual banking institutions because of capital market devices as it is found that mutual banks operating in EU‐15 countries are significantly more cost efficient than commercial banks. Furthermore, results are mixed concerning the financial structure hypothesis that in developed financial systems bank efficiency should not be statistically different across bank‐vs market‐based economies.

Research limitations/implications

The analysis suggests that differences in cost efficiency across bank types can often be explained by the prevailing financial system in each economy.

Practical implications

The evidence illustrates the national diversity of corporate governance systems in Europe and can be important to policy makers who are concerned with the full integration of the European financial system.

Originality/value

To the best of the authors’ knowledge, there are no previous similar empirical works for the EU banking sector. Such a study has important policy implications especially due to the fact that the EU banking sector is experiencing profound structural changes and a full integration has not yet been achieved.

Details

Managerial Finance, vol. 35 no. 3
Type: Research Article
ISSN: 0307-4358

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Article
Publication date: 1 September 2002

Barbara Casu and Claudia Girardone

Outlines previous research on the efficiency of the Italian banking system, describes the structure of Italian banking groups and uses parametric (stochastic cost frontier) and…

1198

Abstract

Outlines previous research on the efficiency of the Italian banking system, describes the structure of Italian banking groups and uses parametric (stochastic cost frontier) and non‐parametric (data envelopment analysis) approaches to assess the efficiency of Italian bank conglomerates in 1995 compared with the parent companies and subsidiearies. Explains the methodology and presents the results, which suggest that parent companies and subsidiaries are more efficient than groups and that efficiency is not related to size. Analyses efficiencies of scale and scope to show that bank groups gain more economies of scope than parents or subsidiaries; but finds mixed results for economies of scale.

Details

Managerial Finance, vol. 28 no. 9
Type: Research Article
ISSN: 0307-4358

Keywords

Available. Content available
Article
Publication date: 8 May 2009

Jens Hagendorff

647

Abstract

Details

Journal of Financial Regulation and Compliance, vol. 17 no. 2
Type: Research Article
ISSN: 1358-1988

Available. Content available
Book part
Publication date: 1 January 2008

Abstract

Details

Corporate Governance in Less Developed and Emerging Economies
Type: Book
ISBN: 978-1-84855-252-4

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Article
Publication date: 21 September 2015

Solomon W. Giorgis Sahile, Daniel Kipkirong Tarus and Thomas Kimeli Cheruiyot

The purpose of this paper is to test market structure-performance hypothesis in banking industry in Kenya. Specifically, the structure-conduct-performance (SCP) and market…

1649

Abstract

Purpose

The purpose of this paper is to test market structure-performance hypothesis in banking industry in Kenya. Specifically, the structure-conduct-performance (SCP) and market efficiency hypotheses were examined to determine how market concentration and efficiency affect bank performance in Kenya.

Design/methodology/approach

The study used secondary data of 44 commercial banks operating from 2000 to 2009. Three proxies to measure bank performance were used while market concentration and market share were used as proxies for market structure. Market concentration was measured using two concentration measures; the concentration ratio of the four largest banks (CR4) and Herfindahl-Hirschman Index, while market share was used as a proxy for efficiency. The study made use of generalized least square regression method.

Findings

The empirical results confirm that market efficiency hypothesis is a predictor of firm performance in the banking sector in Kenya and rejects the traditional SCP hypothesis. Thus, the results support the view that efficient banks maximize profitability.

Practical implications

The study provides insights into the role of efficiency in enhancing profitability in commercial banks in Kenya. It has managerial implication that profitable banks ought to be efficient and dispels the notion of collusive behavior as a precursor for profitability.

Originality/value

The paper fills an important gap in the extant literature by proving insights into what determines bank profitability in banking sector in Kenya. Although this area is rich in research, little work has been conducted in the developing economies and in particular no study in the knowledge has addressed this critical issue in Kenya.

Details

International Journal of Emerging Markets, vol. 10 no. 4
Type: Research Article
ISSN: 1746-8809

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