Restructuring, Consolidation, and Competition in Latin American Banking Markets

Posted: 13 Mar 2007

See all articles by H. Semih Yildirim

H. Semih Yildirim

York University - Atkinson School of Administrative Studies

George C. Philippatos

University of Tennessee, Knoxville - College of Business Administration

Abstract

This study examines the competitive conditions in the banking industries of eleven Latin American countries for the period 1993-2000. For these countries, the time interval under examination corresponds to an era characterized by substantial reforms to restructure their banking systems, increased consolidation and foreign bank penetration. The banks in our sample are found to be earning their revenues as if operating under monopolistic competition, as in many other developed and emerging financial systems. The results indicate that, overall, market concentration is not significantly related with competitive conduct. At the country level, however, we do observe a decline in competition for Brazil, Chile, and Venezuela in late 1990s which may be attributable to increased consolidation. Further, we observe that deregulation and opening up of the financial markets for foreign participation serves as an important catalyst to increase the competitiveness of banking markets. Higher degree of competition in the sector, in return, is associated with reduced bank margins and profitability but improved cost efficiency.

Keywords: Bank competition, Banking markets consolidation, Latin American banking

JEL Classification: N26, G21, D40

Suggested Citation

Yildirim, H. Semih and Philippatos, George C., Restructuring, Consolidation, and Competition in Latin American Banking Markets. Journal of Banking and Finance, Vol. 31, No. 3, 2007. Available at SSRN: https://ssrn.com/abstract=969502

H. Semih Yildirim (Contact Author)

York University - Atkinson School of Administrative Studies ( email )

218 Atkinson Building
Toronto, Ontario M3J 1C4
Canada
+1 (416) 736-2100 Ext.224777 (Phone)
+1 (416) 736-5963 (Fax)

HOME PAGE: http://www.yorku.ca/yildirim/

George C. Philippatos

University of Tennessee, Knoxville - College of Business Administration ( email )

432 Stokely Management Center
Knoxville, TN 37996-0570
United States
(865) 974-1719 (Phone)

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