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Klaus Schaeck

30 September 2008
WORKING PAPER SERIES - No. 932
Details
Abstract
A growing body of literature indicates that competition increases bank soundness. Applying an industrial organization based approach to large data sets for European and U.S. banks, we offer new empirical evidence that efficiency plays a key role in the transmission from competition to soundness. We use a two-pronged approach. First, we employ Granger causality tests to establish the link between competition and measures of profit efficiency in banking, and find that competition indeed increases bank efficiency. Second, building on these results, we examine the relation between the Boone indicator [Boone, J. (2001) Intensity of competition and the incentive to innovate. IJIO, Vol. 19, pp. 705-726], an innovative measure of competition that focuses on the impact of competition on performance of efficient banks, and relate this measure to bank soundness. We find evidence that competition robustly increases bank soundness, via the efficiency channel.
JEL Code
G21 : Financial Economics→Financial Institutions and Services→Banks, Depository Institutions, Micro Finance Institutions, Mortgages
G28 : Financial Economics→Financial Institutions and Services→Government Policy and Regulation
L11 : Industrial Organization→Market Structure, Firm Strategy, and Market Performance→Production, Pricing, and Market Structure, Size Distribution of Firms
Network
ECB Lamfalussy Fellowship Programme
1 April 2014
WORKING PAPER SERIES - No. 1662
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Abstract
We use a unique dataset with bank clients
JEL Code
D12 : Microeconomics→Household Behavior and Family Economics→Consumer Economics: Empirical Analysis
D13 : Microeconomics→Household Behavior and Family Economics→Household Production and Intrahousehold Allocation
G11 : Financial Economics→General Financial Markets→Portfolio Choice, Investment Decisions
G21 : Financial Economics→Financial Institutions and Services→Banks, Depository Institutions, Micro Finance Institutions, Mortgages
Network
Household Finance and Consumption Network (HFCN)