A Frontier Measure of U.S. Banking Competition
The three main measures of competition (HHI, Lerner Index, and H-Statistic) are uncorrelated for U.S. banks. We investigate why this occurs, propose a frontier measure of competition, and apply it to five major bank service lines using data only available since 2008. Fee-based banking services comprise 35% of bank revenues so assessing competition by service line is preferred to using a single measure for traditional activities extended to the entire bank. Academic-based competition measures explain only 1% of HHI variation. HHI merger/acquisition guidelines could be raised since current banking concentration seems unrelated to competition.
|Date of creation:||Dec 2012|
|Date of revision:|
|Contact details of provider:|| Postal: |
Web page: http://www.dnb.nl/en/
More information through EDIRC
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.:
- Humphrey David & Carbó Valverde Santiago & Maudos Villarroya Joaquín & Molyneux Philip, 2006.
"Cross-Country Comparisons of Competition and Pricing Power in European Banking,"
201036, Fundacion BBVA / BBVA Foundation.
- Carbó, Santiago & Humphrey, David & Maudos, Joaquín & Molyneux, Philip, 2009. "Cross-country comparisons of competition and pricing power in European banking," Journal of International Money and Finance, Elsevier, vol. 28(1), pages 115-134, February.
- Santiago Carbó Valverde & David Humphrey & Joaquin Maudos & Philip Molyneux, 2006. "Cross-country comparisons of competition and pricing power in European banking," Proceedings 1107, Federal Reserve Bank of Chicago.
- Carbo, Santiago & Humphrey, David & Maudos, Joaquin & Molyneux, Philip, 2006. "Cross-Country Comparisons of Competition and Pricing Power in European Banking," MPRA Paper 15258, University Library of Munich, Germany, revised 2006.
- Stijn Claessens & Luc Laeven, 2004.
"What drives bank competition? Some international evidence,"
Federal Reserve Bank of Cleveland, pages 563-592.
- Claessens, Stijn & Laeven, Luc, 2004. "What Drives Bank Competition? Some International Evidence," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 36(3), pages 563-83, June.
- Claessens, Stijn & Laeven, Luc, 2003. "What drives bank competition? some international evidence," Policy Research Working Paper Series 3113, The World Bank.
- Franklin Allen & Douglas Gale, 2004.
"Competition and financial stability,"
Federal Reserve Bank of Cleveland, pages 453-486.
- Boone, Jan, 2004.
"A New Way to Measure Competition,"
CEPR Discussion Papers
4330, C.E.P.R. Discussion Papers.
- DeYoung, Robert, 1997. "A diagnostic test for the distribution-free efficiency estimator: An example using U.S. commercial bank data," European Journal of Operational Research, Elsevier, vol. 98(2), pages 243-249, April.
- Wilko Bolt & David Humphrey, 2008.
"Bank Competition Efficiency in Europe: A Frontier Approach,"
DNB Working Papers
194, Netherlands Central Bank, Research Department.
- 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.
- 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,"
Financial Services working paper
97-02, Federal Reserve Bank of Cleveland.
- Bauer, Paul W. & Berger, Allen N. & Ferrier, Gary D. & Humphrey, David B., 1998. "Consistency Conditions for Regulatory Analysis of Financial Institutions: A Comparison of Frontier Efficiency Methods," Journal of Economics and Business, Elsevier, vol. 50(2), pages 85-114, March.
- 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.).
- J.A. Bikker & L. Spierdijk & P. Finnie, 2007. "The Impact of Market Structure, Contestability and Institutional Environment on Banking Competition," Working Papers 07-29, Utrecht School of Economics.
- Lawrence J. Radecki & John Wenninger & Daniel K. Orlow, 1996. "Bank branches in supermarkets," Current Issues in Economics and Finance, Federal Reserve Bank of New York, vol. 2(Dec).
- Bolt Wilko & Humphrey David, 2007.
"Payment Network Scale Economies, SEPA, and Cash Replacement,"
Review of Network Economics,
De Gruyter, vol. 6(4), pages 1-21, December.
- Wilko Bolt & David Humphrey, 2007. "Payment network scale economies, SEPA, and cash replacement," Working Papers 07-32, Federal Reserve Bank of Philadelphia.
- Mitchell, Karlyn & Onvural, Nur M, 1996. "Economies of Scale and Scope at Large Commercial Banks: Evidence from the Fourier Flexible Functional Form," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 28(2), pages 178-99, May.
- Santiago Carbó Valverde & David Humphrey & Rafael López del Paso, 2007. "Opening the black box: Finding the source of cost inefficiency," Journal of Productivity Analysis, Springer, vol. 27(3), pages 209-220, June.
- 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.
- Beverly Hirtle, 2005.
"The impact of network size on bank branch performance,"
211, Federal Reserve Bank of New York.
- Hirtle, Beverly, 2007. "The impact of network size on bank branch performance," Journal of Banking & Finance, Elsevier, vol. 31(12), pages 3782-3805, December.
- Maudos, Joaquin & Fernandez de Guevara, Juan, 2003.
"Factors Explaining the Interest Margin in the Banking Sectors of the European Union,"
15252, University Library of Munich, Germany.
- Maudos, Joaquin & Fernandez de Guevara, Juan, 2004. "Factors explaining the interest margin in the banking sectors of the European Union," Journal of Banking & Finance, Elsevier, vol. 28(9), pages 2259-2281, September.
- Annamaria Lusardi, 2008.
"Financial Literacy: An Essential Tool for Informed Consumer Choice?,"
NBER Working Papers
14084, National Bureau of Economic Research, Inc.
- Annamaria Lusardi, 2008. "Financial Literacy: An Essential Tool for Informed Consumer Choice?," NFI Working Papers 2008-WP-13, Indiana State University, Scott College of Business, Networks Financial Institute.
- Lusardi, Annamaria, 2008. "Financial literacy: An essential tool for informed consumer choice?," CFS Working Paper Series 2008/19, Center for Financial Studies (CFS).
- Gianni De NicolÃ³ & Abu M. Jalal & John H. Boyd, 2006. "Bank Risk-Taking and Competition Revisited: New Theory and New Evidence," IMF Working Papers 06/297, International Monetary Fund.
- Bauer, Paul W., 1990. "Recent developments in the econometric estimation of frontiers," Journal of Econometrics, Elsevier, vol. 46(1-2), pages 39-56.
- 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.
When requesting a correction, please mention this item's handle: RePEc:dnb:dnbwpp:359. 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: (Rob Vet)
If references are entirely missing, you can add them using this form.