Do Islamic Banks Have Greater Market Power ?

Laurent Weill

Working Papers of LaRGE Research Center from Laboratoire de Recherche en Gestion et Economie (LaRGE), Université de Strasbourg

Abstract: The aim of this paper is to investigate whether Islamic banks have greater market power than conventional banks. Indeed Islamic banks may benefit from a captive clientele, owing to religious principles, which would be charged greater prices. To measure market power, we compute Lerner indices on a sample of banks from 17 countries in which Islamic and conventional banks coexist over the period 2000-2007. Comparison of Lerner indices shows no significant difference between Islamic banks and conventional banks. When including control variables, regression of Lerner indices even suggests that Islamic banks have a lower market power than conventional banks. A robustness check with the Rosse-Panzar model confirms that Islamic banks are not less competitive than conventional banks. The lower market power of Islamic banks can be explained by their different norms and their different incentives.

Keywords: Islamic banks; Lerner index; Bank Competition. (search for similar items in EconPapers)
JEL-codes: D43 D82 G21 (search for similar items in EconPapers)
Date: 2009
New Economics Papers: this item is included in nep-ara, nep-ban, nep-com and nep-cwa
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Citations: View citations in EconPapers (1)

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Related works:
Working Paper: Do Islamic Banks Have Greater Market Power? (2010)
Working Paper: Do Islamic banks have greater market power? (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:lar:wpaper:2009-02

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