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Effects of bank mergers on concentration and efficiency of the venezuelan banking system, 1998-2005

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  • Ruth Guillén

    ()
    (Profesora Asistente. Departamento de Economía e Instituto de Investigaciones Económicas y Sociales, Universidad de Los Andes (ULA). Núcleo Universitario Liria, Edif. G. Piso 3. Mérida-Venezuela.)

  • Bernarda Pinilla

    ()
    (Profesora Titular. Departamento de Economía, Universidad de Los Andes. Núcleo Universitario Liria, Edif. H. Piso 3. Mérida-Venezuela.)

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    Abstract

    This paper analyzes the relation between bank mergers and changes in the concentration and efficiency of the Venezuelan Banking System during the period 1998-2005. Efficiency was estimated through a stochastic cost frontier model. The concentration was measured by deposits and considering the four-firm concentration ratio. The research found evidences that support the idea that mergers are associated with concentration increases. However, the stochastic costs frontier model suggested that banking mergers did not produce efficiency increases; on the contrary, the merged banks were less efficient than non-merged banks.

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    File URL: ftp://iies.faces.ula.ve/Pdf/Revista30/Rev30Guillen.pdf
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    Bibliographic Info

    Article provided by Instituto de Investigaciones Económicas y Sociales (IIES). Facultad de Ciencias Económicas y Sociales. Universidad de Los Andes. Mérida, Venezuela in its journal Economía.

    Volume (Year): 35 (2010)
    Issue (Month): 30 (July-December)
    Pages: 103-142

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    Handle: RePEc:ula:econom:v:35:y:2010:i:30:p:103-142

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    Postal: Facultad de Ciencias Económicas y Sociales. Instituto de Investigaciones Económicas y Sociales. Campus Universitario Liria, Edificio G, Tercer Nivel. Mérida 5101, Estado Mérida, Venezuela
    Phone: +58 74 401111 ext. 1081
    Fax: +58 74 401120
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    Web page: http://iies.faces.ula.ve/
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    Related research

    Keywords: Bank mergers; concentration; efficiency; stochastic cost frontier.;

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    References

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    1. Vanlommel, Emil & de Brabander, Bert & Liebaers, Dirk, 1977. "Industrial Concentration in Belgium: Empirical Comparison of Alternative Seller Concentration Measures," Journal of Industrial Economics, Wiley Blackwell, vol. 26(1), pages 1-20, September.
    2. Allen N. Berger & Loretta J. Mester, 1997. "Inside the Black Box: What Explains Differences in the Efficiencies of Financial Institutions?," Center for Financial Institutions Working Papers 97-04, Wharton School Center for Financial Institutions, University of Pennsylvania.
    3. Aigner, Dennis & Lovell, C. A. Knox & Schmidt, Peter, 1977. "Formulation and estimation of stochastic frontier production function models," Journal of Econometrics, Elsevier, vol. 6(1), pages 21-37, July.
    4. Avkiran, Necmi Kemal, 1999. "The evidence on efficiency gains: The role of mergers and the benefits to the public," Journal of Banking & Finance, Elsevier, vol. 23(7), pages 991-1013, July.
    5. Berger, Allen N. & Demsetz, Rebecca S. & Strahan, Philip E., 1999. "The consolidation of the financial services industry: Causes, consequences, and implications for the future," Journal of Banking & Finance, Elsevier, vol. 23(2-4), pages 135-194, February.
    6. Berger, Allen N. & Hunter, William C. & Timme, Stephen G., 1993. "The efficiency of financial institutions: A review and preview of research past, present and future," Journal of Banking & Finance, Elsevier, vol. 17(2-3), pages 221-249, April.
    7. Ratti, Ronald A. & Lee, Sunglyong & Seol, Youn, 2008. "Bank concentration and financial constraints on firm-level investment in Europe," Journal of Banking & Finance, Elsevier, vol. 32(12), pages 2684-2694, December.
    8. Castro Carlos Alberto, 2001. "Eficiencia-X en el sector bancario colombiano," REVISTA DESARROLLO Y SOCIEDAD, UNIVERSIDAD DE LOS ANDES-CEDE.
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