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

Author

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  • Kozak Sylwester

    (PhD Hab. Associate Professor, Institute of Economy and Finance, Warsaw University of Life Sciences; Address: Warsaw University of Life Sciences, 166 Nowoursynowska Street, 02-787Warszawa, Poland)

  • Wierzbowska Agata

    (PhD, Associate Professor, Graduate School of Economics, Kobe University)

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.

Suggested Citation

  • Kozak Sylwester & Wierzbowska Agata, 2021. "Banking Market Concentration and Bank Efficiency. Evidence from Southern, Eastern and Central Europe," South East European Journal of Economics and Business, Sciendo, vol. 16(1), pages 38-52, June.
    • Handle: RePEc:vrs:seejeb:v:16:y:2021:i:1:p:38-52:n:2
    DOI: 10.2478/jeb-2021-0004
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    2. Hela Kallel & Mohamed Triki, 2024. "Foreign ownership, bank efficiency and stability: Whether the institutional quality of countries is important?," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 29(1), pages 632-653, January.

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    More about this item

    Keywords

    SECE countries; banking market concentration; bank efficiency; panel data;
    All these keywords.

    JEL classification:

    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms

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