IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this article or follow this journal

The identification of technology regimes in banking: Implications for the market power-fragility nexus

  • Koetter, Michael
  • Poghosyan, Tigran

Neglecting the existence of different technologies in banking can contaminate efficiency, market power, and other performance measures. By simultaneously estimating (i) technology regimes conditional on exogenous factors, (ii) efficiency conditional on risk management, and (iii) Lerner indices of German banks, we identify three distinct technology regimes: Public & Retail, Small & Specialized, and Universal & Relationship. System estimation at the regional level reveals that greater bank market power increases bank profitability but also fosters corporate defaults. Corporate defaults, in turn, lead to higher probabilities of bank distress, which supports the market power-fragility hypothesis.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.sciencedirect.com/science/article/B6VCY-4VP667S-1/2/cc678299d2dc1016c8f8f2582844033c
Download Restriction: Full text for ScienceDirect subscribers only

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Article provided by Elsevier in its journal Journal of Banking & Finance.

Volume (Year): 33 (2009)
Issue (Month): 8 (August)
Pages: 1413-1422

as
in new window

Handle: RePEc:eee:jbfina:v:33:y:2009:i:8:p:1413-1422
Contact details of provider: Web page: http://www.elsevier.com/locate/jbf

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Angelini, Paolo & Cetorelli, Nicola, 2003. " The Effects of Regulatory Reform on Competition in the Banking Industry," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 35(5), pages 663-84, October.
  2. Ratti, Ronald A. & Lee, Sunglyong & Seol, Youn, 2008. "Bank concentration and financial constraints on firm-level investment in Europe," Journal of Banking & Finance, Elsevier, vol. 32(12), pages 2684-2694, December.
  3. Degryse, H.A. & Ongena, S., 2003. "Distance, Lending Relationships, and Competition," Discussion Paper 2003-123, Tilburg University, Center for Economic Research.
  4. J.A. Bikker & K. Haaf, 2000. "Competition, concentration and their relationship: an empirical analysis of the banking industry," Research Series Supervision (discontinued) 30, Netherlands Central Bank, Directorate Supervision.
  5. Berger, Allen N, 1995. "The Relationship between Capital and Earnings in Banking," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 27(2), pages 432-56, May.
  6. Jan Boone, 2008. "A New Way to Measure Competition," Economic Journal, Royal Economic Society, vol. 118(531), pages 1245-1261, 08.
  7. Delis, Manthos D & Tsionas, Efthymios, 2009. "The joint estimation of bank-level market power and efficiency," MPRA Paper 14040, University Library of Munich, Germany.
  8. Kumbhakar, Subal C. & Park, Byeong U. & Simar, Leopold & Tsionas, Efthymios G., 2007. "Nonparametric stochastic frontiers: A local maximum likelihood approach," Journal of Econometrics, Elsevier, vol. 137(1), pages 1-27, March.
  9. Huang, Rocco & Ratnovski, Lev, 2011. "The dark side of bank wholesale funding," Journal of Financial Intermediation, Elsevier, vol. 20(2), pages 248-263, April.
  10. Francisco Pérez García & Joaquín Maudos Villarroya & Juan Francisco Fernández de Guevara Radoselovics, 2003. "Integration And Competition In The European Financial Markets," Working Papers. Serie EC 2003-12, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
  11. Franklin Allen & Douglas Gale, 2004. "Competition and financial stability," Proceedings, Federal Reserve Bank of Cleveland, pages 453-486.
  12. Battese, G E & Coelli, T J, 1995. "A Model for Technical Inefficiency Effects in a Stochastic Frontier Production Function for Panel Data," Empirical Economics, Springer, vol. 20(2), pages 325-32.
  13. Lensink, Robert & Meesters, Aljar & Naaborg, Ilko, 2008. "Bank efficiency and foreign ownership: Do good institutions matter?," Journal of Banking & Finance, Elsevier, vol. 32(5), pages 834-844, May.
  14. Megginson, William L., 2005. "The economics of bank privatization," Journal of Banking & Finance, Elsevier, vol. 29(8-9), pages 1931-1980, August.
  15. Williams, Jonathan, 2004. "Determining management behaviour in European banking," Journal of Banking & Finance, Elsevier, vol. 28(10), pages 2427-2460, October.
  16. Sapienza, Paola, 2004. "The effects of government ownership on bank lending," Journal of Financial Economics, Elsevier, vol. 72(2), pages 357-384, May.
  17. Kauko, Karlo, 2009. "Managers and efficiency in banking," Journal of Banking & Finance, Elsevier, vol. 33(3), pages 546-556, March.
  18. Greene, William, 2005. "Reconsidering heterogeneity in panel data estimators of the stochastic frontier model," Journal of Econometrics, Elsevier, vol. 126(2), pages 269-303, June.
  19. Gan, Jie, 2004. "Banking market structure and financial stability: Evidence from the Texas real estate crisis in the 1980s," Journal of Financial Economics, Elsevier, vol. 73(3), pages 567-601, September.
  20. Altunbas, Yener & Evans, Lynne & Molyneux, Philip, 2001. "Bank Ownership and Efficiency," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 33(4), pages 926-54, November.
  21. John H. Boyd & Gianni De Nicolã, 2005. "The Theory of Bank Risk Taking and Competition Revisited," Journal of Finance, American Finance Association, vol. 60(3), pages 1329-1343, 06.
  22. Michael Koetter & James W. Kolari, 2008. "Testing the quiet life of U.S. banks with adjusted Lerner indices," Proceedings 1094, Federal Reserve Bank of Chicago.
  23. Becker, Bo, 2007. "Geographical segmentation of US capital markets," Journal of Financial Economics, Elsevier, vol. 85(1), pages 151-178, July.
  24. Luis Orea & Subal C. Kumbhakar, 2004. "Efficiency measurement using a latent class stochastic frontier model," Empirical Economics, Springer, vol. 29(1), pages 169-183, January.
  25. Keeley, Michael C, 1990. "Deposit Insurance, Risk, and Market Power in Banking," American Economic Review, American Economic Association, vol. 80(5), pages 1183-1200, December.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:eee:jbfina:v:33:y:2009:i:8:p:1413-1422. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.