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Competition, Concentration, Efficiency, and their Relationship in the Polish Banking Sector

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Abstract

European banking sectors have been subject to various forms of deregulation, liberalization, as well as dramatic improvements in information technology (IT). As the result of the creation of the European Union's Single Market, the financial institutions are transforming themselves in response to fundamental changes in regulation and technology. Many of these changes have vast implications for competition, concentration and the efficiency of the financial sectors. This paper examines the impact of increasing concentration and new technologies, linked with the mergers and acquisitions (M&A) process, on the degree of competition and technical efficiency of the Polish commercial banks. The goal of this paper is to check whether, during the analyzed period (1997- 2002), the concentration of the commercial banks had a negative impact on the competition in the Polish banking sector. In order to carry out a quantitative assessment of changes in the market structure and technical efficiency of the Polish banking sector, the study estimates competitive behavior in the Polish banking system by applying the method developed by Panzar and Rosse (1987). Moreover, this study assesses the technical efficiency and productivity in the Polish banking sector by applying the method of Data Envelopment Analysis (DEA). The empirical results, for the analyzed period of 1997-2002, have shown that in Poland there is monopolistic competition. It seems that foreign entry, connected with the M&A process, and rapid changes in IT in Polish commercial banks, is one of the reasons for the improving technical efficiency measures and productivity indices. It has also influenced the level of competition in the Polish banking sector.

Suggested Citation

  • Malgorzata Pawlowska, 2005. "Competition, Concentration, Efficiency, and their Relationship in the Polish Banking Sector," NBP Working Papers 32, Narodowy Bank Polski, Economic Research Department.
  • Handle: RePEc:nbp:nbpmis:32
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    File URL: http://www.nbp.pl/publikacje/materialy_i_studia/32_en.pdf
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    Citations

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    Cited by:

    1. Nikolay Nenovsky & Martin Ivanov & Gergana Mihaylova, 2008. "The Evolution of Bulgarian Banks' Efficiency During the Twenties: A Dea Approach," Working Papers 82, Bank of Greece.
    2. repec:ceh:journl:y:2017:v:2:p:168-191 is not listed on IDEAS
    3. Nikolay Nenovsky & Petar Chobanov & Gergana Mihaylova & Darina Koleva, 2008. "Efficiency of the Bulgarian Banking System: Traditional Approach and Data Envelopment Analysis," ICER Working Papers 22-2008, ICER - International Centre for Economic Research.
    4. Olszak, Małgorzata & Świtała, Filip & Kowalska, Iwona, 2013. "Competition in commercial banks in Poland – analysis of Panzar-Rosse H-statistics," MPRA Paper 53782, University Library of Munich, Germany.
    5. Evan Kraft, 2006. "How Competitive Is Croatia's Banking System?," Working Papers 14, The Croatian National Bank, Croatia.
    6. Katerina Voycheska, 2011. "Empirical Research on the Banking Efficiency in R. Macedonia," Economic Thought journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 1, pages 73-93.

    More about this item

    Keywords

    Competition; Concentration; Efficiency; Panzar-Rosse model; DEA; Mergers and Acquisitions; Market Structure;

    JEL classification:

    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • G2 - Financial Economics - - Financial Institutions and Services
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance

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