Market Structure, Scale Efficiency, and Risk as Determinants of German Banking Profitability

Peiyi Yu and Werner Neus

No 294, Tübinger Diskussionsbeiträge from University of Tübingen, School of Business and Economics

Abstract: The Scale-Efficiency version of the Efficient-Structure Hypothesis and the Structure-Conduct-Performance Hypothesis find empirical support in German banking data from 1998 to 2002. Due to the acceptance of the two hypotheses and the existence of overall economies of scale, we conclude that German banks may improve their profitability by increasing their asset size and/or by consolidation. The increased banking profitability will not only come from monopolistic power (higher concentration rate) but also from the scale efficiency benefit. We also find that portfolio risk is a key factor in determining the profit-structure relationship.

Keywords: Profit-structure relationship; Market Structure; Scale efficiency; Portfolio Risk (search for similar items in EconPapers)
JEL-codes: C33 G14 G21 L11 (search for similar items in EconPapers)
Date: 2005
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Citations: View citations in EconPapers (17)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:tuedps:294

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