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Cost efficiency and risk as determinants of market share in banking: Evidence from the old and new eu member and candidate countries

Author

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  • Bashkim Nurboja

    (University for Business and Technology, Faculty of Business Management and Economics. Lagjja Kalabria, 10000 Prishtina, Kosovo)

  • Marko Košak

    (University of Ljubljana, Faculty of Economics, Kardeljeva plošèad 17, 1000 Ljubljana, Slovenia)

Abstract

In this study we investigate how cost efficiency and risk affect market share in European banking industry. Our analysis is motivated by the well-known efficiency hypothesis and structure-conduct-performance theory. We hypothesize that improved efficiency and enhanced riskiness of a bank should be related to an increase in its market share. Therefore, in contrast to other studies, we include risk as a determinant of market share. In the study we use annual data for 36 European countries’ banks for the time span from 2007 to 2015. The results reveal that risk and efficiency are positively associated with market share of assets, loans and deposits. Additionally, we find that banks in transition countries were less successful in transposing their cost efficiency advantages into market share gains than banks in European developed countries. The empirical model is estimated by using the GMM method in order to account for dynamic nature of investigated components and to mitigate the endogeneity problem

Suggested Citation

  • Bashkim Nurboja & Marko Košak, 2019. "Cost efficiency and risk as determinants of market share in banking: Evidence from the old and new eu member and candidate countries," Zbornik radova Ekonomskog fakulteta u Rijeci/Proceedings of Rijeka Faculty of Economics, University of Rijeka, Faculty of Economics and Business, vol. 37(2), pages 499-525.
    • Handle: RePEc:rfe:zbefri:v:37:y:2019:i:2:p:499-525
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    References listed on IDEAS

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    More about this item

    Keywords

    bank efficiency; risk; market share;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure

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