Thursday, July 21, 2011

Bank Market Structures and Performance Around the World

Posted by D. Daniel Sokol

Andreas Dietrich, Lucerne University of Applied Sciences and Arts and Andreas Walter Mattig, University of Saint Gallen examine Bank Market Structures and Performance Around the World.

ABSTRACT: This paper revisits the old discussion of the applicability of structure-conduct-performance models to the banking industry. In contrast to earlier (single) country studies, we aimed at providing an overview of how it would look like, if the model indeed would be applied over time and across a non-biased selection of a multi-country study. By analyzing 105 countries, we find – in line with parts of the earlier theoretical literature – a large variance, in terms of countries in which the model actually seems to work. This leads us into looking for actual reasons that determine the applicability of the structure-conduct-performance concept and the institutional and legal environment that allow increased profitability through collusion. We find drivers for this applicability more based on the macro level than on the bank-specific level.

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