Bank competition, financial reform, and institutions: The importance of being developed

Delis, Manthos D.

doi:10.1016/j.jdeveco.2011.05.012

Cited by 186 publications

(140 citation statements)

References 43 publications

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“…The second model treated all the variables as exogenous. The results support the hypothesis that bank specific-variables are better modelled as endogenous and country-level as exogenous (in accordance with Delis, 2012), because the Sargan test has 1.00 p-value. This suggests that the instruments are acceptable.…”

Section: Insert Table 3 About Here]supporting

confidence: 84%

What drives investment bank performance? The role of risk, liquidity and fees prior to and during the crisis

Mamatzakis

Bermpei

2014

International Review of Financial Analysis

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This paper examines factors that affect the performance of investment banks in the G7 and Switzerland. In particular, we focus on the role of risk, liquidity and investment banking fees. Panel analysis shows that those variables significantly impact upon performance as derived from stochastic frontier analysis (SFA). Given our sample also comprises the financial crisis, we further test for regimes switches using dynamic panel threshold analysis. Results show different underlying regimes, in particular over the financial crisis. In addition, a strong positive effect of Z-Score on performance for banks in the regime of low default risk is reported, whilst fee-income ratio has also a positive impact for banks with low level of fees. On the other hand, liquidity exerts a negative impact. Notably, there is a clear trend of mobility of banks across the two identified threshold regimes with regards to risk a year before the financial crisis. Our results provide evidence that recent regulation reforms regarding capital adequacy and liquidity requirements are on the right track and could enhance performance.

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Section: Insert Table 3 About Here]supporting

confidence: 84%

What drives investment bank performance? The role of risk, liquidity and fees prior to and during the crisis

Mamatzakis

Bermpei

2014

International Review of Financial Analysis

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“…A solution to these issues is proposed by Delis (2012), Delis et al (2012) and Clerides et al (2013), who use a non-parametric estimation method for the estimation of marginal cost.…”

Section: Estimation Of Bank Market Powermentioning

confidence: 99%

“…Delis (2012) and Delis et al (2012) use this model to estimate marginal cost for each observation in their sample. We use exactly the same approach here and provide below a summary of the discussion from Delis et al (2012) for convenience.…”

Section: Appendix B Practical Issues In the Estimation Of Bank Markementioning

confidence: 99%

“…We first estimate market power at the bank-year level, using a technique that allows efficient estimation of marginal cost also at the bank-year level (Delis, 2012;Delis et al, 2012). This is important because this method captures changes in the marginal cost for each bank at each point in time, which could be in part attributed to changes in monetary policy as discussed above.…”

Section: Introductionmentioning

confidence: 99%

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Bank Market Power and Monetary Policy Transmission

2014

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This paper examines empirically the role of bank market power as an internal factor influencing banks' reaction in terms of lending and risk-taking to monetary policy impulses. The analysis is carried out for the US and euro-area banking sectors over the period 1997-2010. Market power is estimated at the bank-year level, using a method that allows the efficient estimation of marginal cost of banks also at the bank-year level. The findings show that banks with even moderate levels of market power are able to buffer the negative impact of a monetary policy change on bank loans and credit risk. This effect is somewhat more pronounced in the euro area compared to the US. However, following the subprime mortgage crisis of 2007, the level of market power needed to shield bank loans and credit risk from the impact of a change in monetary policy increased substantially. This is clear evidence that the financial crisis reinforced the mechanisms of the bank lending and the risk-taking channels.

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“…First, the discussion here refers to relatively developed banking and financial systems. If markets are not deep enough and institutions are weak, then the forces highlighted above might not be at work and market power can be damaging to firm performance (see also Delis, 2012). Second, there is a stark difference between the two hypotheses in terms of causality.…”

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confidence: 99%

Bank Market Power and Firm Performance*

2016

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Does market power of banks affect firm performance? To answer this question we examine 25,236 syndicated loan facilities granted between 2000 and 2010 by 296 banks to 9,029 US non-financial firms. Accounting for both observed and unobserved bank and firm heterogeneity, we find that firms that were recently poorly performing obtain loans from banks with more market power. However, in the year after loan origination market power positively affects firm performance, but only if it is not too high. Our estimates thus suggest that bank market power can facilitate access to credit by poorly-performing firms, yet at the same time also boosts the performance of the firms that obtain credit.

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Bank competition, financial reform, and institutions: The importance of being developed

Cited by 186 publications

References 43 publications

What drives investment bank performance? The role of risk, liquidity and fees prior to and during the crisis

What drives investment bank performance? The role of risk, liquidity and fees prior to and during the crisis

Bank Market Power and Monetary Policy Transmission

Bank Market Power and Firm Performance*

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