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Assessing competition in the private banking sector in Ecuador: an econometric approach with the Panzar-Rosse model

Author

Listed:
  • Segundo Camino-Mogro

    (Invited Professor in the School of Economics and Administrative Sciences of Universidad Católica de Santiago de Guayaquil and the National Director of research and economic studies in the Superintendencia de Compañías, Valores y Seguros del Ecuador.)

  • Grace Armijos-Bravo

    (Invited Professor in the School of Economics and Business of Ecotec University.)

Abstract

This paper assesses empirically the competitive conditions in the private banking sector in Ecuador from 2000 to 2015. First, we measure the competition in the private banking sector, using the Panzar-Rosse H-statistic by the total revenue equation; we apply POLS, year fixed effects, bank fixed effects, and random effects. Second, we determine whether there is equilibrium in the long run in this sector by ROA regression equation and finally we aim to identify evidence of economies of scale in the private banking sector. In this path, we analyze three different panels, 2000 – 2015, 2000 – 2006 and 2007 – 2015. The main results indicate that private banks in Ecuador operate under monopolistic competition. In addition, this competition increased during the 2007 – 2015 period; other result shows that there is no equilibrium in the long run for this sector. Finally, there are not economies of scale, therefore we can argue that small banks do not operate with disadvantages compared to medium and large banks.

Suggested Citation

  • Segundo Camino-Mogro & Grace Armijos-Bravo, 2018. "Assessing competition in the private banking sector in Ecuador: an econometric approach with the Panzar-Rosse model," Cuadernos de Economía - Spanish Journal of Economics and Finance, Asociación Cuadernos de Economía, vol. 41(117), pages 225240-2252, Noviembre.
    • Handle: RePEc:cud:journl:v:41:y:2018:i:117:p:225-240
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    Citations

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    Cited by:

    1. Sanchez-Cartas Juan Manuel, 2020. "The Panzar–Rosse H Statistic and Monopoly. Issues on its Use as a Market Power Measure," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 20(4), pages 1-11, October.
    2. Vera-Gilces, Paul & Camino-Mogro, Segundo & Ordeñana-Rodríguez, Xavier & Cornejo-Marcos, Gino, 2020. "A look inside banking profitability: Evidence from a dollarized emerging country," The Quarterly Review of Economics and Finance, Elsevier, vol. 75(C), pages 147-166.
    3. Camino-Mogro, Segundo & Armijos-Bravo, Grace & Cornejo-Marcos, Gino, 2019. "Competition in the insurance industry in Ecuador: An econometric analysis in life and non-life markets," The Quarterly Review of Economics and Finance, Elsevier, vol. 71(C), pages 291-302.
    4. Tito Ondo Ela-Medja & Pilar Alberca, 2023. "Efficiency and Competitiveness of the Equatorial Guinean Financial Sector," Mathematics, MDPI, vol. 11(1), pages 1-21, January.

    More about this item

    Keywords

    Market Concentration; Competition; Banks;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General
    • L80 - Industrial Organization - - Industry Studies: Services - - - General

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