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Banking Sector Performance in Some Latin American Countries: Market Power versus Efficiency

Author

Listed:
  • Georgios E. Chortareas
  • Claudia Girardone
  • Jesus Gustavo Garza-Garcia

Abstract

The wave of consolidation and the rapid increase in market concentration that took place in most Latin American countries has generated concerns about the rise in banks' market power and its potential effects on consumers. This paper advances the existing literature by testing the market power (Structure-Conduct-Performance and Relative Market Power) and efficient structure (X- and scale efficiency) hypotheses for a sample of over 2,500 bank observations in nine Latin American countries over 1997-2005. We use the Data Envelopment Analysis technique to obtain reliable efficiency measures. We produce evidence supporting the efficient structure hypotheses. Finally, capital ratios and bank size seem to be among the most important factors in explaining profits for these Latin American banks.

Suggested Citation

  • Georgios E. Chortareas & Claudia Girardone & Jesus Gustavo Garza-Garcia, 2010. "Banking Sector Performance in Some Latin American Countries: Market Power versus Efficiency," Working Papers 2010-20, Banco de México.
  • Handle: RePEc:bdm:wpaper:2010-20
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    File URL: http://www.banxico.org.mx/publicaciones-y-discursos/publicaciones/documentos-de-investigacion/banxico/%7B85A22835-4272-F218-10F8-412344010F8B%7D.pdf
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    References listed on IDEAS

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    Cited by:

    1. Manfred Kremer, 2016. "Macroeconomic effects of financial stress and the role of monetary policy: a VAR analysis for the euro area," International Economics and Economic Policy, Springer, vol. 13(1), pages 105-138, January.
    2. repec:pra:mprapa:54437 is not listed on IDEAS

    More about this item

    Keywords

    Structure-Conduct-Performance; Efficient Structure; Banking System in Some Latin American Countries; Data Envelopment Analysis (DEA);

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity

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