Competition in banking: A disequilibrium approach

John Goddard and John Wilson

Journal of Banking & Finance, 2009, vol. 33, issue 12, 2282-2292

Abstract: The Rosse-Panzar revenue test for competitive conditions in banking is based on observation of the impact on bank revenue of variation in factor input prices. We identify the implications for the H-statistic of misspecification bias in the revenue equation, arising when adjustment towards market equilibrium is partial and not instantaneous. In simulations, fixed effects estimation produces a measured H-statistic that is severely biased towards zero. Empirical results for the banking sectors of the Group of Seven (G7) countries corroborate our principal finding, that a dynamic formulation of the revenue equation is required for accurate identification of the H-statistic.

Keywords: Banking; Competition; Revenue; test; Dynamic; panel; estimation (search for similar items in EconPapers)
Date: 2009
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Citations: View citations in EconPapers (63)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:33:y:2009:i:12:p:2282-2292

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