Competition and Efficiency in the Mexican Banking Sector
AbstractThe Mexican banking sector experienced a process of liberalization which aimed towards increasing the level of competition and efficiency. This paper studies the evolution of the efficiency of the Mexican banking sector from 2002 to 2012 and also analyses its relationship with the degree of banking competition. To do so, efficiency scores are estimated by applying the non-parametric methodology, Data Envelopment Analysis. Furthermore, the Boone Indicator is used to assess the degree of competition and included among other possible determinants of bank efficiency. The main results indicate increasing trends of efficiency in the banking sector during the period of study. Moreover, a direct relationship between banking competition and efficiency is observed. Besides, the capitalization index, market share and loan intensity increase efficiency whereas noninterest expenses and non performing loans decrease the level of efficiency. Lastly, in regards to the relative efficiency of local or foreign ownership of banks, it is found that the systemâ€™s average efficiency trend is observed among both local and foreign banks, but local banks are somewhat more efficient.
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Bibliographic InfoPaper provided by BBVA Bank, Economic Research Department in its series Working Papers with number 1329.
Length: 26 pages
Date of creation: Oct 2013
Date of revision:
Panel Data; Bank Competition; Mexican Banking Sector; Boone Indicator;
Find related papers by JEL classification:
- D4 - Microeconomics - - Market Structure and Pricing
- G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
- 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
- N2 - Economic History - - Financial Markets and Institutions
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-10-18 (All new papers)
- NEP-BAN-2013-10-18 (Banking)
- NEP-COM-2013-10-18 (Industrial Competition)
- NEP-CSE-2013-10-18 (Economics of Strategic Management)
- NEP-EFF-2013-10-18 (Efficiency & Productivity)
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