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Bank-Level Estimates of Market Power

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  • Sophocles N. Brissimis

    ()
    (Bank of Greece)

  • Manthos D. Delis

    (University of Ioannina)

Abstract

The aim of this study is to provide an empirical methodology for the estimation of market power of individual banks. The new method employs the well-known model of Panzar and Rosse (1987) and proposes its estimation using the local regression technique. Thus, a number of restrictive assumptions regarding the properties of the production function of banks are relaxed, while the method proves successful in providing reasonable estimates of bank-level market power when applied to a large panel of banks of transition countries. The empirical results suggest that many banks in the sample deviate significantly from competitive practices and that market power varies substantially across banks in each country. Country averages of the bank-level results exhibit a very close relationship with standard, industry-level Panzar-Rosse estimates.

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Bibliographic Info

Paper provided by Bank of Greece in its series Working Papers with number 93.

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Length: 26 pages
Date of creation: Jan 2009
Date of revision:
Handle: RePEc:bog:wpaper:93

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Keywords: Bank output; Market power; bank-level; local regression;

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References

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Citations

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Cited by:
  1. Nguyen, My & Skully, Michael & Perera, Shrimal, 2012. "Bank market power and revenue diversification: Evidence from selected ASEAN countries," Journal of Asian Economics, Elsevier, vol. 23(6), pages 688-700.
  2. Cipollini, Andrea & Fiordelisi, Franco, 2012. "Economic value, competition and financial distress in the European banking system," Journal of Banking & Finance, Elsevier, vol. 36(11), pages 3101-3109.
  3. Vasilis Droucopoulos & Panagiotis Chronis, 2010. "“Assessing market dominance”: a comment and an extension," Working Papers 109, Bank of Greece.
  4. Benjamin Miranda Tabak & Guilherme Maia Rodrigues Gomes & Maurício da Silva Medeiros Júnior, 2012. "The Impact of Market Power at Bank Level in Risk-taking: the Brazilian case," Working Papers Series 283, Central Bank of Brazil, Research Department.
  5. Dimitrios Sideris, 2011. "Optimum currency areas, structural changes and the endogeneity of the OCA criteria: evidence from six new EU member states," Applied Financial Economics, Taylor & Francis Journals, vol. 21(4), pages 195-206.

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