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Competition, securitization, and efficiency in US banks

Author

Listed:
  • Antonio Bayeh

    (UCLy - UCLy (Lyon Catholic University), ESDES - ESDES, Lyon Business School - UCLy - UCLy - UCLy (Lyon Catholic University))

  • Mohammad Bitar

    (Nottingham University Business School [Nottingham])

  • Radu Burlacu

    (CERAG - Centre d'études et de recherches appliquées à la gestion - UGA - Université Grenoble Alpes)

  • Thomas Walker

    (Nottingham University Business School [Nottingham])

Abstract

This paper investigates the different effects of competition and securitization on US bank efficiency between 2001 and 2019. Using Propensity Score Matching (PSM) and a two-step dynamic Generalized Method of Moments (GMM) estimation, we find that higher securitization increases banks' cost efficiency scores. When banks are under competitive pressure, the fixed-effects and GMM models show that securitization is positively associated with the cost efficiency of banks, while it mitigates their screening and monitoring incentives. Robust to a battery of alternative tests, our findings introduce bank efficiency as a new mechanism explaining how banks that securitize loans insignificantly invest in screening and monitoring their potentially risky borrowers. In order to promote sustainable loan quality, this paper underlines the importance of improved regulation in highly competitive markets where loan securitization is more common.

Suggested Citation

  • Antonio Bayeh & Mohammad Bitar & Radu Burlacu & Thomas Walker, 2021. "Competition, securitization, and efficiency in US banks," Post-Print hal-03981365, HAL.
    • Handle: RePEc:hal:journl:hal-03981365
    DOI: 10.1016/j.qref.2021.04.004
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    Citations

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    Cited by:

    1. Tan, Yong & Walheer, Barnabé, 2024. "Stability and economic performances in the banking industry: The case of China," The Quarterly Review of Economics and Finance, Elsevier, vol. 95(C), pages 326-345.
    2. Kuessi, Richard & Nantob, N'Yilimon & Aguey, Segnon & Couchoro, Mawuli Kodjovi, 2023. "Competition and banking efficiency in the WAEMU: The role of multinationals and institutions," International Economics, Elsevier, vol. 175(C), pages 45-62.
    3. Philipp Steinbrunner, 2024. "Are governments bad entrepreneurs? On productivity and public ownership in Central European post‐Communist countries," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 95(1), pages 33-66, March.
    4. Philipp Steinbrunner, 2023. "I want a quiet life! On productivity and competition in the Central European energy sector," Economics of Transition and Institutional Change, John Wiley & Sons, vol. 31(2), pages 403-428, April.
    5. Mark T. Plaat & Laura Spierdijk, 2024. "Do Different Bank-Level Securitization Variables Measure The Same Thing? A Confirmatory Factor Analysis," De Economist, Springer, vol. 172(4), pages 339-363, December.
    6. de Moraes, Claudio Oliveira & Cunha, Leonardo Vieira & Galvis-Ciro, Juan Camilo, 2024. "Banking sustainability in a large emerging economy: Focus on Brazilian banks," Journal of Economics and Business, Elsevier, vol. 132(C).
    7. Japan Huynh, 2023. "Bank competition and liquidity hoarding," Eurasian Economic Review, Springer;Eurasia Business and Economics Society, vol. 13(3), pages 429-467, December.
    8. Alem Gebremedhin Berhe, 2025. "Measuring technical efficiency of Ethiopian commercial banks: multiple criterion data envelopment analysis," Cogent Business & Management, Taylor & Francis Journals, vol. 12(1), pages 2507217-250, December.
    9. Mercadier, Mathieu & Strobel, Frank, 2024. "Bank insolvency risk, Z-score measures and unimodal returns: A refinement," The Quarterly Review of Economics and Finance, Elsevier, vol. 98(C).

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