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Bank competition efficiency in Europe: A frontier approach

  • Bolt, Wilko
  • Humphrey, David

There are numerous ways to indicate the degree of banking competition across countries. Antitrust authorities rely on the structure-conduct-performance paradigm while academics prefer price mark-ups (Lerner index) or correlations of input costs with output prices (H-statistic). These measures are not always strongly correlated within or across countries. Frontier efficiency analysis is used to devise an alternative indicator of competition and rank European countries by their dispersion from a "competition frontier". The frontier is determined by how well payment and other costs explain variations in loan-deposit rate spread and non-interest activity revenues. Overall, differences in competition appear to be small.

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

Volume (Year): 34 (2010)
Issue (Month): 8 (August)
Pages: 1808-1817

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Handle: RePEc:eee:jbfina:v:34:y:2010:i:8:p:1808-1817
Contact details of provider: Web page: http://www.elsevier.com/locate/jbf

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  1. Paul W. Bauer & Allen N. Berger & Gary D. Ferrier & David B. Humphrey, 1997. "Consistency conditions for regulatory analysis of financial institutions: a comparison of frontier efficiency methods," Finance and Economics Discussion Series 1997-50, Board of Governors of the Federal Reserve System (U.S.).
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  15. Bolt, Wilko & Humphrey, David, 2010. "Bank competition efficiency in Europe: A frontier approach," Journal of Banking & Finance, Elsevier, vol. 34(8), pages 1808-1817, August.
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