<abstract xmlns="http://www.w3.org/1999/xhtml">

<p>The importance of the question about the relationship between concentration and efficiency lies in the fact that banks’ efficiency affects ability to extend loans and ensure financial stability of the banking sector. The study examines this relationship on the example of 150 banks operating between 2005 and 2019 in 11 EU and 8 non-EU countries from the SECE region. The value of profit efficiency was assessed with the stochastic frontier approach, and next regressed with the banking market concentration and bank specific and macroeconomic explanatory variables. The results for the entire sample as well as for domestic and foreign-owned banks indicate that concentration positively and nonlinearly impacts bank efficiency, both in EU and non-EU countries. Moreover, the size of a bank and income diversification help to improve efficiency of banks in the SECE region. The study shows that banks in SECE countries seem to follow the efficient structure hypothesis.</p>
</abstract>

The importance of the question about the relationship between concentration and efficiency lies in the fact that banks’ efficiency affects ability to extend loans and ensure financial stability of the banking sector. The study examines this relationship on the example of 150 banks operating between 2005 and 2019 in 11 EU and 8 non-EU countries from the SECE region. The value of profit efficiency was assessed with the stochastic frontier approach, and next regressed with the banking market concentration and bank specific and macroeconomic explanatory variables. The results for the entire sample as well as for domestic and foreign-owned banks indicate that concentration positively and nonlinearly impacts bank efficiency, both in EU and non-EU countries. Moreover, the size of a bank and income diversification help to improve efficiency of banks in the SECE region. The study shows that banks in SECE countries seem to follow the efficient structure hypothesis.

Banking Market Concentration and Bank Efficiency. Evidence from Southern, Eastern and Central Europe

South East European Journal of Economics and Business

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.

The importance of the question about the relationship between concentration and efficiency lies in the fact that banks’ efficiency affects ability to extend...

Banking Market Concentration and Bank Efficiency. Evidence from Southern, Eastern and Central Europe

Published Online: Jul 12, 2021

Page range: 38 - 52

DOI: https://doi.org/10.2478/jeb-2021-0004

Keywords
SECE countries, banking market concentration, bank efficiency, panel data

© 2021 Sylwester Kozak et al., published by Sciendo

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.

Banking Market Concentration and Bank Efficiency. Evidence from Southern, Eastern and Central Europe

Published Online: Jul 12, 2021

Page range: 38 - 52

DOI: https://doi.org/10.2478/jeb-2021-0004

KeywordsSECE countries, banking market concentration, bank efficiency, panel data

© 2021 Sylwester Kozak et al., published by Sciendo

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.

Keywords
SECE countries, banking market concentration, bank efficiency, panel data