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What are the driving forces of bank competition across different income groups of countries?

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  • Mirzaei, Ali
  • Moore, Tomoe

Abstract

This paper rigorously investigates the determinants of bank competition for 146 countries over the sample period 1999–2011. The results employing both the Lerner index and the Boone indicator, reveal the distinctive characteristics of the competition drivers across different income groups of countries. Amongst other things, a concentrated banking system jeopardises competitiveness in developing economies, however, such a causal nexus is absent for advanced and emerging economies. Contestability and institutional development seem to boost competition in less-developed banking systems, whereas inter-industry competition and financial freedom are beneficial to advanced banking systems. These findings survive robustness tests.

Suggested Citation

  • Mirzaei, Ali & Moore, Tomoe, 2014. "What are the driving forces of bank competition across different income groups of countries?," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 32(C), pages 38-71.
    • Handle: RePEc:eee:intfin:v:32:y:2014:i:c:p:38-71
    DOI: 10.1016/j.intfin.2014.05.003
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    More about this item

    Keywords

    Bank competition; Lerner index; Boone indicator; Market structure; Bank regulations;
    All these keywords.

    JEL classification:

    • D4 - Microeconomics - - Market Structure, Pricing, and Design
    • 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
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • K2 - Law and Economics - - Regulation and Business Law

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