PurposeThis paper aims to examine the relationship between performance and some macro and micro variables in the Argentine commercial banking industry. Included are the profitability and interest variables; return on assets (ROA) and net interest margin (NIM) over the period of 1994 to 2011.Design/methodology/approachThe empirical construct is guided by recent theories of banking performance that employ an industrial organization framework and two dependent variables (with identical control variables) to assure robustness and comparability in findings. The variables for the panel estimated generalized least square (panel EGLS) are constructed using income statements of 62 commercial banks (firm‐level data) as well as a number of industry‐specific and macroeconomic indicators.FindingsFactors such as expense management (operating cost efficiency/inefficiency), leverage and liquidity appear to be important forces behind the net interest margins (NIM) and profits (ROA) in the Argentine banking industry. Higher return on assets (ROA) is associated with banks carrying less leverage and therefore displaying a lower ratio of debt to total assets. Higher interest margin (NIM) is associated with higher operating expenses. Regarding the macroeconomic variables, inflation negatively affects profitability but is positively and significantly related to net interest margin. Banking environment has a positive effect on performance, reflecting the complementarity between banking performance and stock market capitalization.Originality/valueThe paper's value lies in showing that a firm's specific variables reveal better insights when analyzed in relation to banking environment. Indirectly, some of the value of this work lies in highlighting the Central Bank's accommodative monetary policy that has been driving Argentina's economic recovery and credit boom arising in an inflationary environment.

Purpose The purpose of this paper is to analyze the performance of banking institutions in Costa Rica over the period 2004–2014. Design/methodology/approach This paper employs system GMM, dynamic panel data and traditional financial hypothesis framework to analyze bank performance and assess marketplace sustainability for a sample of commercial and cooperative banks from Costa Rica. In the assessment, the authors visit the relative market power, structure conduct performance (SCP) and efficient structure literature. Findings Market share (MS) is positively related to performance whereas the authors find a negative effect of market concentration (Herfindahl–Hirschman index) on bank profits, thereby refuting the SCP hypothesis. The authors accept the “quiet life” hypothesis within Costa Rican banks since a moderate level of profit persistence is detected. Commercial banks are less profitable. Yet when crisis is introduced to the models, it has a significant and negative impact on overall bank performance. Research limitations/implications The authors selected years and banks based on available data plus default information in the relevant database. More insights can be gained from post-2014 developments. Practical implications The current results and conclusions have implications for developing economies (and economic development, in general) by showing that the traditional understanding of cooperative bank model as better for the public good may not be necessarily true. They offer insight into the understanding of how different bank-type institutions affect the public good. Furthermore, expanding the research to Latin America in order to directly compare commercial and cooperative enterprises via a meta-frontier technique would help buttress this evidence. Originality/value This is the most recent study to provide such an investigation for a Latin American country with a sizable MS for cooperative and public sector banks. The paper offers analysis that has been limited in Latin American banking markets thus far.

The market structure-performance relationship has been tested for US banking in industrial organization studies. Two divergent hypotheses with regard to this relationship are the Structure-Conduct-Performance (SCP) Paradigm and Efficient Structure Hypothesis (ESH). This paper presents the test results of both hypotheses with respect to the New York State S&L associations using the time-series and cross sectional (firm-level) data for the most recent period 2000-2010. The results of PEGLS regression indicate that performances of S&Ls vary with respect to operating cost, credit risk and capitalization. Neither market share nor concentration, however, plays a significant role in explaining profitability. The results partially support the ESH as an explanation for the market behavior of New York State S&L associatons. Given that profitable banks are efficient but also risk dependent, additional policies are warranted in order to mitigate risk and maintain the safety and soundness for the remaining S&Ls in the New York State.

No abstract