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Market structure and performance in Spanish banking using a direct measure of efficiency

Listed author(s):
  • Joaquín Maudos Villarroya

    (Instituto Valenciano de Investigaciones Económicas)

This paper analyzes the relationship between market structure and performance within the Spanish banking industry. Three different stochastic measures of efficiency are used (based on three alternative distributional assumptions for inefficiency: half-normal, normal-truncated and exponential). The results obtained support the "modified efficient structure" hypothesis since, even though efficiency is the main determinant of profitability, market power (as reflected in a market share variable), also affects profitability. The results obtained also show that market share is an inadequate proxy for efficiency. Este trabajo analiza la relación existente entre la estructura de mercado y la rentabilidad del sector bancario español. Para ello, se utilizan tres medidas alternativas de eficiencia obtenidas a partir de la estimación de una función estocástica de costes bajo tres supuestos distribucionales (half-normal, norn1al truncada y exponencial). Los resultados obtenidos permiten aceptar la hipótesis de "eficiencia modificada" ya que, si bien la eficiencia es el principal determinante de la rentabilidad, el poder de mercado (aproximado a través de la cuota de mercado) también afecta a la rentabilidad. Los resultados obtenidos también muestra lo inadecuado de utilizar la variable cuota de mercado como proxy de la eficiencia.

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File Function: Fisrt version / Primera version, 1996
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Paper provided by Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie) in its series Working Papers. Serie EC with number 1996-12.

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Length: 32 pages
Date of creation: Sep 1996
Publication status: Published by Ivie
Handle: RePEc:ivi:wpasec:1996-12
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