What Drives Banking Industry Competition in Developing Countries?

Amit Ghosh ()
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Amit Ghosh: Illinois Wesleyan University

Journal of Economic Development, 2018, vol. 43, issue 4, 1-20

Abstract: A competitive banking industry leads to an efficient allocation of financial resources, consequently increasing investment and economic growth. However, pervasive market inefficiencies and outmoded business practices often deter competition in the banking industry of developing countries. The present study examines the determinants of bank competition in such nations for the period 1995-2014 and compares that with high income countries. Employing both fixed-effects and GMM estimations and using two different measures of bank competition, we find greater diversification, credit risks and economic freedom to promote competition in developing countries while higher capitalization, profitability and cost efficiency increases market power.

Keywords: Lerner Index; Boone Indicator; Diversification; Cost Efficiency; Panel Data (search for similar items in EconPapers)
JEL-codes: C23 G21 L1 O16 (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:jed:journl:v:43:y:2018:i:4:p:1-20

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