EconPapers    
Economics at your fingertips  
 

Comparing market power at home and abroad: evidence from Austrian banks and their subsidiaries in CESEE

Martin Feldkircher () and Michael Sigmund

Focus on European Economic Integration, 2017, issue Q3/17, 59-77

Abstract: In this study, we examine markups of Austrian banks and their subsidiaries in Central, Eastern and Southeastern Europe (CESEE) on an unconsolidated level. Markups are evaluated by means of the Lerner index by simultaneously estimating a price and a cost function derived from oligopoly theory. For that purpose, we use a novel fixed effects seemingly unrelated regression approach and a unique supervisory dataset covering around 800 banks over the period from the first quarter of 2008 to the second quarter of 2016. We find evidence for positive markups for Austrian subsidiaries in CESEE. These markups are even higher than the markups of Austrian parent banks, which emphasizes the importance of the CESEE markets for the overall profitability of the Austrian banking sector. Looking at the determinants of markups for Austrian subsidiaries in CESEE, we find that higher Lerner indices are associated with better capitalization, higher loan loss provisions and, more generally, greater size – the latter effect is especially true for banks in more developed host countries. Also, there is a negative correlation between the Lerner indices of subsidiaries and parent banks. This implies that opportunity costs in the home country play a role in determining market power in the host country.

Keywords: Lerner index; banking sector; market power; CESEE (search for similar items in EconPapers)
JEL-codes: D40 G21 L10 C30 (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
https://www.oenb.at/dam/jcr:6d0124c7-f8ac-46d9-8b4 ... ircher_feei_3_17.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:onb:oenbfi:y:2017:i:q3/17:b:4

Ordering information: This journal article can be ordered from
Oesterreichische Nationalbank, Documentation Management and Communications Services, Otto-Wagner Platz 3, A-1090 Vienna, Austria

Access Statistics for this article

Focus on European Economic Integration is currently edited by Doris Ritzberger-Gruenwald and Helene Schuberth

More articles in Focus on European Economic Integration from Oesterreichische Nationalbank (Austrian Central Bank) P.O. Box 61, A-1011 Vienna, Austria. Contact information at EDIRC.
Bibliographic data for series maintained by Markus Eller ().

 
Page updated 2019-02-05
Handle: RePEc:onb:oenbfi:y:2017:i:q3/17:b:4