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The joint estimation of bank-level market power and efficiency

Delis, MD and Tsionas, EG (2009) The joint estimation of bank-level market power and efficiency Journal of Banking and Finance, 33 (10). pp. 1842-1850.

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Abstract

The aim of this study is to provide a methodology for the joint estimation of efficiency and market power of individual banks. The proposed method utilizes the separate implications of the new empirical industrial organization and the stochastic frontier literatures and suggests identification using the local maximum likelihood (LML) technique. Through LML, estimation of market power of individual banks becomes feasible, while a number of restrictive theoretical and empirical assumptions are relaxed. The empirical analysis is carried out on the basis of EMU bank data. Market power estimates indicate fairly competitive conduct in general; however, heterogeneity in market power estimates is substantial across banks. The latter result suggests that the practice of some banks deviates from the average fairly competitive behavior, a finding that has important policy implications. Finally, efficiency and market power present a negative relationship, which is in line with the so-called "quiet life hypothesis". © 2009 Elsevier B.V. All rights reserved.

Item Type: Article
Authors :
NameEmailORCID
Delis, MDUNSPECIFIEDUNSPECIFIED
Tsionas, EGUNSPECIFIEDUNSPECIFIED
Date : 1 October 2009
Identification Number : 10.1016/j.jbankfin.2009.04.006
Depositing User : Symplectic Elements
Date Deposited : 16 May 2017 15:15
Last Modified : 16 May 2017 15:15
URI: http://epubs.surrey.ac.uk/id/eprint/818349

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