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Efficiency and Market Power in Spanish Banking

35 Pages Posted: 22 Aug 2010 Last revised: 30 Oct 2010

Rolf Färe

Oregon State University - Department of Economics

Shawna Grosskopf

Oregon State University

Joaquín Maudos

University of Valencia - Faculty of Economics

Emili Tortosa-Ausina

Jaume I University - Department of Economics

Date Written: October 19, 2010

Abstract

Some recent studies have been investigating the existence of market power in the European banking system, in general, and the Spanish banking industry, in particular. Although results are mixed, the evidence suggests some commercial banks and savings banks benefit from monopoly rents. Some other studies [Berger and Hannan, Review of Economics and Statistics LXXX (1998) 454-465] have also found strong evidence that banks in more concentrated markets exhibit lower cost efficiency levels. Our study merges these two groups of findings by exploring how cost efficiency measures for Spanish banks are related to market power using more flexible techniques, which are more consistent with those employed to measure efficiency in the first stage of the analysis. Results show that the relationship varies according to the level of market power, the component of efficiency evaluated (cost, technical or allocative) and the type of banking firm (commercial bank or savings bank), suggesting that the "quiet life" might be a reality only for some banks.

Suggested Citation

Färe, Rolf and Grosskopf, Shawna and Maudos, Joaquín and Tortosa-Ausina, Emili, Efficiency and Market Power in Spanish Banking (October 19, 2010). 23rd Australasian Finance and Banking Conference 2010 Paper. Available at SSRN: https://ssrn.com/abstract=1662142 or http://dx.doi.org/10.2139/ssrn.1662142

Rolf Färe

Oregon State University - Department of Economics ( email )

303 Ballard Extension Hall
Corvallis, OR 97331
United States
541-737-8184 (Phone)
541-737-5917 (Fax)

Shawna Grosskopf

Oregon State University ( email )

303 Ballard Extension Hall
Corvallis, OR 97331
United States
541-737-8184 (Phone)

Joaquín Maudos

University of Valencia - Faculty of Economics ( email )

Valencia, E-46022
Spain

HOME PAGE: http://www.ivie.es/insti/org/inves.php?idioma=EN

Emili Tortosa-Ausina (Contact Author)

Jaume I University - Department of Economics ( email )

Campus del Riu Sec.
E-12071 Castellon
Spain

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