scholarly journals Banking Market Concentration and Bank Efficiency. Evidence from Southern, Eastern and Central Europe

2021 ◽  
Vol 16 (1) ◽  
pp. 38-52
Author(s):  
Sylwester Kozak ◽  
Agata Wierzbowska
Keyword(s):  
Financial Stability ◽  
Banking Sector ◽  
Stochastic Frontier ◽  
Market Concentration ◽  
Stochastic Frontier Approach ◽  
Bank Efficiency ◽  
Explanatory Variables ◽  
Eu Countries ◽  
Banking Market ◽  
The Relationship

Abstract The importance of the question about the relationship between concentration and efficiency lies in the fact that banks’ efficiency affects ability to extend loans and ensure financial stability of the banking sector. The study examines this relationship on the example of 150 banks operating between 2005 and 2019 in 11 EU and 8 non-EU countries from the SECE region. The value of profit efficiency was assessed with the stochastic frontier approach, and next regressed with the banking market concentration and bank specific and macroeconomic explanatory variables. The results for the entire sample as well as for domestic and foreign-owned banks indicate that concentration positively and nonlinearly impacts bank efficiency, both in EU and non-EU countries. Moreover, the size of a bank and income diversification help to improve efficiency of banks in the SECE region. The study shows that banks in SECE countries seem to follow the efficient structure hypothesis.

Banks’ stability-efficiency within dual banking system: a stochastic frontier analysis

2015 ◽  
Vol 8 (4) ◽  
pp. 472-490 ◽  
Author(s):  
Salma Louati ◽  
Younes Boujelbene
Keyword(s):  
Financial Stability ◽  
Banking Sector ◽  
Stochastic Frontier Analysis ◽  
Stochastic Frontier ◽  
Banking System ◽  
Content Type ◽  
Frontier Analysis ◽  
Explanatory Variables ◽  
Banking Stability ◽  
Conventional Banks

Purpose – The purpose of this paper is to examine and compare the market power and the efficiency-stability of Islamic and conventional banks in the MENA zone and South East Asia during the 2005-2012 period. Design/methodology/approach – The author applied an empirical approach in two steps. First, the author estimates the Lerner indicator, which is a measure of competition. Then, this measure is regressed and other explanatory variables on the banking “stability-efficiency” are derived simultaneously from the estimation of a stability stochastic frontier. Findings – The author concludes that increased competition in the Islamic banking sector promotes the overall banking stability. Besides, whether there is a low or high competitiveness, the size of an Islamic bank is positively related to financial stability. However, large conventional banks operating in market with limited competitiveness become more involved in the risk behavior. The author concludes that capitalization has a positive effect on stability only in case of low competitiveness. Originality/value – The originality of this research lies in the application of the stochastic frontier approach (SFA) on the Z-score indicator. This methodology enables to take into account the differences between the current and the optimum stability that each bank can achieve, thus creating a new measure of financial stability called “efficiency-stability”.

scholarly journals BANK EFFICIENCY AND CONCENTRATION OF THE BANKING SECTOR IN THE CEE COUNTRIES

2019 ◽  
pp. 77-89
Author(s):  
Sylwester Kozak ◽  
Agata Wierzbowska
Keyword(s):  
Inflation Rate ◽  
Banking Sector ◽  
Banking System ◽  
The Other ◽  
Gdp Per Capita ◽  
Bank Capital ◽  
Bank Efficiency ◽  
Banking Market ◽  
Per Capita ◽  
The Relationship

The relationship between the structure of the banking market and efficiency of banks has been a subject of many studies for several decades. There is no uniform opinion on the correlation between these variables. The goal of the research is to investigate this relationship for 96 banks operating in eleven CEE countries in the years of 2005-2017. Bank efficiency scores are assessed with the SFA method and regressed with bank and macroeconomic characteristics. The results show that the efficiency of banks is positively affected by the concentration of the market on which they operate, as well as by the size of individual banks. This relationship is valid for all examined countries. Additionally, bank efficiency is positively impacted by improving the banking system. On the other hand, the GDP per capita, inflation rate and bank capital ratio are not conducive to bank efficiency.

Foreign Ownership and Bank Efficiency

2014 ◽  
pp. 75-100
Author(s):  
Özlem Olgu ◽  
Emrah Yılmaz
Keyword(s):  
Banking Sector ◽  
Relevant Literature ◽  
Balance Sheet ◽  
Data Envelopment ◽  
Bank Efficiency ◽  
Financial Ratio ◽  
Second Stage ◽  
Financial Ratio Analysis ◽  
The Relationship ◽  
Shed Light

This chapter examines the association between Foreign Direct Investment (FDI) and efficiency of commercial banks in Turkey during the 2003-2010 period. First, the authors examine the technical efficiency of banks by applying the Data Envelopment Analysis (DEA) and financial ratio analysis following the relevant literature. Then, they attempt to shed light on the relationship between FDI and bank efficiency applying a second stage regression analysis. The results indicate that banks that have received FDI are more efficient than others whilst there is no significant correlation among the FDI dummy and bank efficiency in Turkey. Moreover, the analysis of balance sheet ratios suggests that foreign investors target more profitable and larger banks in the sector to form partnerships. Thus, consistent with Berger et al. (2003), the authors propose that efficiency is a pre-condition rather than a result of FDI in the Turkish banking sector.

scholarly journals PANEL STOCHASTIC FRONTIER ANALYSIS OF PROFITABILITY AND EFFICIENCY OF TURKISH BANKING SECTOR IN THE POST CRISIS ERA / TURKIJOS BANKŲ SEKTORIAUS VEIKLOS PELNINGUMO IR EFEKTYVUMO ANALIZĖ POKRIZINIU LAIKOTARPIU

2011 ◽  
Vol 12 (4) ◽  
pp. 629-654 ◽  
Author(s):  
Ahmet Faruk Aysan ◽  
Mustafa Mete Karakaya ◽  
Metin Uyanik
Keyword(s):  
Structural Changes ◽  
Banking Sector ◽  
Stochastic Frontier Analysis ◽  
Stochastic Frontier ◽  
Foreign Banks ◽  
Efficiency Gain ◽  
Stochastic Frontier Approach ◽  
Banking Efficiency ◽  
Frontier Analysis ◽  
Efficiency Measures

This paper examines the efficiency and its relation to profitability in Turkish banking sector by employing Panel Stochastic Frontier Approach. In the post crises period, extensive structural changes have taken place and a great number of new developments have occurred, affecting the efficiency of banking sector. This is the first study that employs panel stochastic frontier approach for banking efficiency in Turkey. In this research, both cost and profit efficiency measures are estimated for the panel data consisting of 32 banks between 2002–2007. Results suggest that there is cost efficiency gain and convergence in the efficiency levels of banks. As another interesting result, foreign banks are less efficient and state banks are more efficient. This paper also analyzes the relation between efficiency and profitability and finds no robust relation between them. However, the bank size matters more for profitability. Santrauka Autoriai nagrinėja Turkijos bankų veiklą, t. y. jų pelningumą bei efektyvumą pokriziniu laikotarpiu. Šis laikotarpis buvo pasirinktas todėl, kad atsirado daug įvairių struktūrinių pokyčių, kurie turėjo įtakos bankininkystės sektoriaus efektyvumui. Tyrimui buvo pasirinkti 32 Turkijoje veikiantys bankai (jų veiklos rodikliai prieš ekonominę krizę ir po jos). Rezultatai rodo, kad Turkijoje veikiančių užsienio komercinių bankų veikla yra mažiau efektyvesnė nei valstybinių. Taip pat autoriai analizuoja bankų veiklos efektyvumo ir pelningumo santykį, tačiau, kaip rodo gauti rezultatai, stipraus ryšio tarp jų nėra.

scholarly journals Bank Competition, Efficiency, and Stability in Macau

2019 ◽  
Vol 8 (4) ◽  
pp. 157
Author(s):  
Harry Xia ◽  
Kevin Lei ◽  
Jiaochen Liang
Keyword(s):  
Economies Of Scale ◽  
Banking Sector ◽  
Banking System ◽  
Bank Loans ◽  
Bank Competition ◽  
Income Volatility ◽  
Bank Efficiency ◽  
Insolvency Risk ◽  
Relationship Of ◽  
The Relationship

Macau has the uppermost population density and the fourth-highest GDP per capita in the world. Macau’s banking system is regarded as one of the most important indicators of Macau’s macroeconomic growth and stability during its transformation into a wealthy and modern metropolis. In this study, we use a sample of 26 banks to explore the relationship of bank competition, efficiency and stability in Macau from its return to China in 1999 to 2016. Our results demonstrate that bank competition does cause efficiency in Macau throughout the study period. We also find indications of a positive but not significant connection between bank market power and bank fragility including income volatility and insolvency risk. Moreover, this study finds no evidence that the size of operations proxied by total bank loans and total assets would impact bank efficiency, indicating that economies of scale or bank market share don’t necessarily bring about efficiency in Macau. Our evidence contributes to the literature by being the first to thoroughly examine the relation of bank competition, efficiency and stability in Macau. The findings provide meaningful implications to the practitioners and policymakers to make sound decisions accordingly, especially to closely monitor and maintain a proper level of competition in Macau’s banking sector.

Analysis of the development of financial and banking services in Poland in comparison to the European Union countries

2017 ◽  
Vol 62 (10) ◽  
pp. 38-51
Author(s):  
Dorota Pekasiewicz ◽  
Agata Szczukocka
Keyword(s):  
Social Life ◽  
Banking Sector ◽  
Dominant Role ◽  
Value Added ◽  
The European Union ◽  
Banking Services ◽  
Services Sector ◽  
Eu Countries ◽  
Banking Market ◽  
Level Of Economic Development

In recent years the services sector has been playing a dominant role in economic and social life, as reflected by its predominant share in the creation of gross value added, and a growing share of employment. The aim of the article is to draw attention to the development of financial and banking services in Poland as compared to other EU countries. To assess the similarity between the countries multidimensional scaling method was used. The research was based on data for 2014 derived from the European Central Bank. Most of the indicators compared showed a significant — but decreasing — distance between Poland and other EU countries. The results obtained allow us to conclude that the development of the banking sector both in Poland and in other EU countries depends on the level of economic development and the situation on the banking market.

scholarly journals THE EFFECTS OF COMPETITION ON EFFICIENCY: THE VIETNAMESE BANKING INDUSTRY EXPERIENCE

2017 ◽  
pp. 1-30 ◽  
Author(s):  
THANH PHAM THIEN NGUYEN ◽  
SON HONG NGHIEM
Keyword(s):  
Cost Efficiency ◽  
Banking Sector ◽  
Stochastic Frontier Analysis ◽  
Global Financial Crisis ◽  
Stochastic Frontier ◽  
Bank Efficiency ◽  
Frontier Analysis ◽  
The Cost ◽  
Efficiency Effects ◽  
Industry Experience

Given considerable changes in the Vietnamese banking environment brought about by significant reforms towards liberalization during the last two decades, this study investigates the evolution of competition and efficiency, compares the competition and efficiency of state-owned banks to joint-stock banks, and then tests the “quiet life” hypothesis in this industry over the period 2000–2014. This study employs the efficiency-adjusted Lerner index (i.e., market power) to capture competition, and the cost efficiency estimated by a Fourier-flexible function stochastic frontier analysis (SFA) to capture bank efficiency. This study firstly finds a slight improvement of competition and cost efficiency in the Vietnamese banking sector over the analysis period. Secondly, there are no significant differences in competition and cost efficiency level between state-owned and joint-stock banks. Thirdly, a positive causality running from competition to cost efficiency is documented, providing evidence of supporting the “quiet life” hypothesis. Finally, positive efficiency effects of the banks’ capital ratio and size are found, while insignificant impacts of the growth of GDP per capita and 2007 global financial crisis were observed. The results are strongly robust to a variety of tests. The findings suggest pro-competition, pro-capitalization and pro-size expansion policies in the Vietnamese banking sector if targeting at improving the cost efficiency of Vietnamese banks.

scholarly journals Investigating the Market Interest Rate on Commercial Banks Financial Performance in Bangladesh

2021 ◽  
Vol 5 (1) ◽  
pp. 3-12
Author(s):  
Debashis Saha ◽  
Prodip Chandra Bishwas ◽  
Md. Mustofa Ahmed Sumon
Keyword(s):  
Interest Rate ◽  
Financial Performance ◽  
Commercial Banks ◽  
Financial Stability ◽  
Banking Sector ◽  
Time Series Data ◽  
Positive Impact ◽  
Series Data ◽  
Market Interest Rate ◽  
The Relationship

The banking sector is the most vital partner of development for countries' economies. It has a remarkable contribution to the country's Gross Domestic Product. This study investigates the relationship between the market interest rate and commercial banks' financial performance. As Bangladesh's banking industry is growing, it is vital to maintain a more robust profitability level for its financial stability and soundness. Banks have some determinants that have a significant impact on their performance. The convenience sampling method is used to select the targeted sample. The study includes the time series data of eight years of fifteen commercial banks listed on the Dhaka Stock Exchange in Bangladesh. Multiple variable linear regression and correlation analysis are performed to examine the relationship of market interest rate with banks' profitability with statistical software, IBM SPSS version 25, and Microsoft excel. The study explored that the market interest rate has a significant positive impact on banks' profitability. It is also found that the lending rate and interest rate spread are significantly correlated with the banks' financial performance. The study recommended that banks make their investment to make a higher profit margin to enhance their management and financial soundness efficiency.

scholarly journals SMEs debt financing in the EU: on the eve of the coronacrisis

2020 ◽  
Vol 15 (3) ◽  
pp. 81-94
Author(s):  
Yevheniia Polishchuk ◽  
Anna Kornyliuk ◽  
Inna Lopashchuk ◽  
Alina Pinchuk
Keyword(s):  
Interest Rates ◽  
Financial Stability ◽  
Banking Sector ◽  
Debt Crisis ◽  
Debt Financing ◽  
Bank Loans ◽  
Eu Countries ◽  
Credit Lines ◽  
Level Data ◽  
Governmental Support

SMEs are the main drivers of economic development. As the debt crisis and coronavirus crisis show, despite their importance, they are extremely sensitive to economic downturns. Therefore, SMEs need to be supported through various tools. The paper is aimed at evaluating the SMEs’ bank and governmental support in the northern and southern EU countries in two crisis periods and assessing the financial state of SMEs on the eve of coronacrisis using micro-level data. It was proved that bank loans and credit lines remain the main sources of SMEs’ financing. After the debt crisis, banks are becoming more loyal to SMEs.It was proved that SMEs from the northern EU countries suffered less from the previous crisis and therefore started their recovery earlier than the southern ones in terms of profitability, liquidity and debt burden. In addition, it was shown that both groups on the eve of the new turbulence period were in better financial state compared to the previous debt crisis. The southern EU countries suffered more from both crises. At the same time, due to effective governmental support and bank loyalty, their SMEs entered the coronacrisis at the same level of financial stability as the northern ones. Since the new support measures are concentrated primarily in the banking sector through loan guarantee schemes and reduced interest rates, it is essential to provide debt financing to high-quality borrowers and avoid the debt crisis in southern counties.

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