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- Profitability, Market Structure And Efficiency: An Application To The Spanish Industry

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Author Info
Mercedes Gumbau Albert () (Universitat de València)
Joaquín Maudos Villarroya (Instituto Valenciano de Investigaciones Económicas)

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Abstract

This paper tests the different hypotheses explaining profitability in the generic framework of hypotheses of collusion versus efficiency, presenting as its main contribution the use of a direct measurement of efficiency. This measurement is obtained by applying frontier techniques using the information provided by the Spanish Ministry of Industry and Energy¿s Survey of Business Strategies (Encuesta Sobre Estrategias Empresariales) for the period 1991-94 and for the 18 sectors of activity in which the sample was divided. The evidence obtained enables us, on the one hand, to clearly reject the hypothesis of collusion in Spanish industry, since in only one sector does concentration positively affect profitability, and furthermore, the results allow us to reject in most cases the pure hypothesis of efficiency, as although efficiency does contribute positively to explaining differences in profitability, the market share, which would capture the effect of market power, also affects it positively. Thus, in many cases the empirical results indicate some limited support for the modified efficient structure hypothesis. En este trabajo se realiza un contraste de las distintas hipótesis explicativas de la rentabilidad en el marco genérico de las hipótesis de colusión versus eficiencia, presentando como principal aportación la utilización de una medida directa de eficiencia. Dicha medida se obtiene mediante la aplicación de técnicas frontera utilizando la información proporcionada por la Encuesta Sobre Estrategias Empresariales para el periodo 1991-94 y para los 18 sectores de actividad en los que se ha dividido la muestra. La evidencia obtenida permite, por una parte, rechazar claramente la hipótesis de colusión en la industria española ya que en tan sólo un sector la concentración afecta positivamente a la rentabilidad y, por otra parte, los resultados permiten rechazar en la mayoría de los casos la hipótesis pura de eficiencia, ya que si bien la eficiencia contribuye de forma positiva a explicar las diferencias de rentabilidad, la cuota de mercado, que captataría el efecto del poder de mercado, también afecta de forma positiva. Así, en muchos casos la evidencia obtenida es parcialmente favorable a la denominada "hipótesis de estructura eficiente modificada".

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Publisher Info
Paper provided by Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie) in its series Working Papers. Serie EC with number 2000-05.

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Length: 32 pages
Date of creation: May 2000
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Publication status: Published by Ivie
Handle: RePEc:ivi:wpasec:2000-05

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Related research
Keywords: rentabilidad estructura de mercado eficiencia industria profitability market structure efficiency industry

References listed on IDEAS
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  1. Schmalensee, Richard, 1987. "Collusion versus Differential Efficiency: Testing Alternative Hypotheses," Journal of Industrial Economics, Blackwell Publishing, vol. 35(4), pages 399-425, June. [Downloadable!] (restricted)
  2. Esperanza Gracia, 1999. "Márgenes y cuotas de mercado. Un análisis con un micropanel," Investigaciones Economicas, Fundación SEPI, vol. 23(3), pages 393-428, September. [Downloadable!]
  3. Maudos, Joaquin, 1998. "Market Structure and Performance in Spanish Banking Using a Direct Measure of Efficiency," Applied Financial Economics, Taylor and Francis Journals, vol. 8(2), pages 191-200, April. [Downloadable!] (restricted)
  4. Cristina Mazón, 1993. "Is Profitability related to market Share? An Intra-Industry Study in Spanish Manufacturing," Banco de España Working Papers 9327, Banco de España.
  5. Cristina Mazón, 1993. "Is Profitability related to market Share? An Intra-Industry Study in Spanish Manufacturing," Banco de España Working Papers 9327, Banco de España.
  6. Smirlock, Michael & Gilligan, Thomas & Marshall, William, 1986. "Tobin's q and the Structure-Performance Relationship: Reply," American Economic Review, American Economic Association, vol. 76(5), pages 1211-13, December. [Downloadable!] (restricted)
  7. Bauer, Paul W. & Hancock, Diana, 1993. "The efficiency of the Federal Reserve in providing check processing services," Journal of Banking & Finance, Elsevier, vol. 17(2-3), pages 287-311, April. [Downloadable!] (restricted)
  8. Aigner, Dennis & Lovell, C. A. Knox & Schmidt, Peter, 1977. "Formulation and estimation of stochastic frontier production function models," Journal of Econometrics, Elsevier, vol. 6(1), pages 21-37, July. [Downloadable!] (restricted)
  9. Smirlock, Michael & Gilligan, Thomas & Marshall, William, 1984. "Tobin's q and the Structure-Performance Relationship," American Economic Review, American Economic Association, vol. 74(5), pages 1051-60, December. [Downloadable!] (restricted)
  10. Goldberg, Lawrence G. & Rai, Anoop, 1996. "The structure-performance relationship for European banking," Journal of Banking & Finance, Elsevier, vol. 20(4), pages 745-771, May. [Downloadable!] (restricted)
  11. Schmalensee, Richard, 1989. "Inter-industry studies of structure and performance," Handbook of Industrial Organization, in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 2, chapter 16, pages 951-1009 Elsevier. [Downloadable!] (restricted)
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