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How good is the BankScope database? A cross-validation exercise with correction factors for market concentration measures

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  • Kaushik Bhattacharya

Abstract

The paper examines the quality of the BankScope database, by comparing results based on it to those obtained from the population-level data for India disseminated by the Reserve Bank of India. Despite good coverage and minor reporting errors in the individual reported units, strong evidence of selectivity bias in BankScope data for India is found. A major source of the selectivity bias for India is the almost total omission of Regional Rural Banks and Foreign Banks. It is shown that this selectivity bias affects estimates of all summary statistical measures and could lead users of the data to conclude that the Indian banking market is unimodal when, in reality, it is segmented and has a bimodal pattern. Kolmogorov-Smironov tests reveal that neither the distribution of the log of total assets nor that of market shares based on the BankScope data could be treated same as the corresponding population distributions for India. Despite these limitations, the paper shows that a few popularly used market concentration measures could be estimated from BankScope data accurately, provided the coverage ratio with respect to the size variable is known from alternative sources and is adequate. Coverage of about 90% with respect to the size variable is found to be sufficient for approximating population HHI. For k-bank concentration measures, accurate estimates could be obtained if, in addition, the top k banks in the population are also available in the sample. In contrast, for entropy measures, results indicate that adequate coverage with respect to both the size variable and the number of financial entities would be required.

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Bibliographic Info

Paper provided by Bank for International Settlements in its series BIS Working Papers with number 133.

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Length: 21 pages
Date of creation: Sep 2003
Date of revision:
Handle: RePEc:bis:biswps:133

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Keywords: Kolmogorov-Smironov test; market concentration measures;

References

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  1. Corvoisier, Sandrine & Gropp, Reint, 2001. "Bank Concentration and Retail Interest Rates," Working Paper Series 0072, European Central Bank.
  2. Eric Nauenberg & Kisalaya Basu & Harish Chand, 1997. "Hirschman-Herfindahl index determination under incomplete information," Applied Economics Letters, Taylor & Francis Journals, vol. 4(10), pages 639-642.
  3. Huberto M. Ennis, 2001. "On the size distribution of banks," Economic Quarterly, Federal Reserve Bank of Richmond, issue Fall, pages 1-25.
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Cited by:
  1. Alejandro Micco & Ugo Panizza & Monica Yañez, 2005. "Bank Ownership and Performance Does Politics Matter?," Working Papers Central Bank of Chile 356, Central Bank of Chile.
  2. Gambacorta, Leonardo, 2005. "Inside the bank lending channel," European Economic Review, Elsevier, vol. 49(7), pages 1737-1759, October.
  3. Korte, Josef, 2013. "Catharsis - The Real Effects of Bank Insolvency and Resolution," Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79938, Verein für Socialpolitik / German Economic Association.
  4. Mike Mariathasan & Ouarda Merrouche, 2012. "Recapitalization, credit and liquidity," Economic Policy, CEPR & CES & MSH, vol. 27(72), pages 603-646, October.
  5. De Haas, Ralph & Ferreira, Daniel & Taci, Anita, 2010. "What determines the composition of banks' loan portfolios? Evidence from transition countries," Journal of Banking & Finance, Elsevier, vol. 34(2), pages 388-398, February.
  6. Korte, Josef, 2013. "Catharsis - The real effects of bank insolvency and resolution," Discussion Papers 21/2013, Deutsche Bundesbank, Research Centre.
  7. Chun-Yu Ho, 2007. "Deregulation, Competition and Consumer Welfare in Banking Market: Evidence from Hong Kong," Working Papers 242007, Hong Kong Institute for Monetary Research.
  8. Choudhry Tanveer Shehzad & Jakob de Haan & Bert Scholtens, 2009. "Growth and Earnings Persistence in Banking Firms: A Dynamic Panel Investigation," CESifo Working Paper Series 2772, CESifo Group Munich.
  9. Johan Mathisen & Thierry D. Buchs, 2005. "Competition and Efficiency in Banking," IMF Working Papers 05/17, International Monetary Fund.

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