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Profit, Cost and Scale Efficiency for Latin American Banks: Concentration-Performance Relationship

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  • Benjamin M. Tabak
  • Dimas M. Fazio
  • Daniel O. Cajueiro

Abstract

Using a sample of 495 Latin American banks over the period 2001-2008, this paper investigates how bank concentration influences cost and profit efficiency. We calculate scale efficiency to assess whether these banks are close to their optimal size. We find that banks are more inefficient in profits than in costs; concentration impairs cost efficiency; larger banks have higher performance, but this advantage decreases in concentrated markets; private and foreign banks are the most efficient; most banks are operating under increasing returns of scale, which contributes to the discussion on Basel III.

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File URL: http://www.bcb.gov.br/pec/wps/ingl/wps244.pdf
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Bibliographic Info

Paper provided by Central Bank of Brazil, Research Department in its series Working Papers Series with number 244.

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Date of creation: May 2011
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Handle: RePEc:bcb:wpaper:244

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Web page: http://www.bcb.gov.br/?english

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Cited by:
  1. Cândida Ferreira, 2012. "Bank market concentration and efficiency in the European Union: a panel granger causality approach," Working Papers Department of Economics 2012/03, ISEG - School of Economics and Management, Department of Economics, University of Lisbon.

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