A Revenue-Based Frontier Measure of Banking Competition | Zendy

Santiago Carbó Valverde | Zendy; David B. Humphrey | Zendy; Francisco Rodríguez Fernández | Zendy

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A Revenue-Based Frontier Measure of Banking Competition

Author(s) -

Santiago Carbó Valverde,

David B. Humphrey,

Francisco Rodríguez Fernández

Publication year - 2009

Publication title -

ssrn electronic journal

Language(s) - English

Resource type - Journals

ISSN - 1556-5068

DOI - 10.2139/ssrn.1577884

Subject(s) - frontier , revenue , measure (data warehouse) , competition (biology) , business , industrial organization , economics , finance , computer science , geography , data mining , ecology , archaeology , biology

Measuring banking competition using the HHI, Lerner index, or H-statistic can give conflicting results. Borrowing from frontier analysis, we provide an alternative approach and apply it to Spain over 1992-2005. Controlling for differences in asset composition, productivity, scale economies, risk, and business cycle influences, we find no differences in competition between commercial and savings banks nor between large and small institutions, but we conclude that competition weakened after 2000. This appears related to strong loan demand where real loan-deposit rate spreads rose and fees were stable for activities where scale economies should have been realized.

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