Cost efficiency and risk as determinants of market share in banking: : evidence from the old and new EU member and candidate countries

Nurboja, Bashkim (author), Košak, Marko (author)

In this study we investigate how cost efficiency and risk affect market share in European banking industry. Our analysis is motivated by the well-known efficiency hypothesis and structure-conduct-performance theory. We hypothesize that improved efficiency and enhanced riskiness of a bank should be related to an increase in its market share. Therefore, in contrast to other studies, we include risk as a determinant of market share. In the study we use annual data for 36 European countries’ banks for the time span from 2007 to 2015. The results reveal that risk and efficiency are positively associated with market share of assets, loans and deposits. Additionally, we find that banks in transition countries were less successful in transposing their cost efficiency advantages into market share gains than banks in European developed countries. The empirical model is estimated by using the GMM method in order to account for dynamic nature of investigated components and to mitigate the endogeneity problem.

• Language: English
• Keywords: banks, banking, money market, risk
• Work type: Article
• Typology: 1.01 - Original Scientific Article
• Organization: EF - School of Economics and Business
• Publication version: Version of Record
• Year: 2019
• Number of pages: Str. 499-525
• Numbering: Vol. 37, no. 2
• PID: 20.500.12556/RUL-117832
• UDC: 339.7
• ISSN on article: 1331-8004
• DOI: 10.18045/zbefri.2019.2.499
• COBISS.SI-ID: 25468390
• Publication date in RUL: 29.07.2020

Record is a part of a journal

• Title: Zbornik radova Ekonomskog fakulteta u Rijeci
• Shortened title: Zb. rad. Ekon. fak. Rij.
• Publisher: Sveučilište u Rijeci, Ekonomski fakultet, = University of Rijeka, Faculty of Economics
• ISSN: 1331-8004
• COBISS.SI-ID: 1301937

Licences

• License: CC BY-NC-ND 4.0, Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International
• Link: http://creativecommons.org/licenses/by-nc-nd/4.0/
• Description: The most restrictive Creative Commons license. This only allows people to download and share the work for no commercial gain and for no other purposes.
• Licensing start date: 29.07.2020

Secondary language

• Language: Croatian
• Title: Troškovna učinkovitost i rizik kao odrednice tržišnog udjela u bankarstvu: empirijski dokazi starih i novih država članica Europske unije i zemalja kandidata

Abstract

U ovom članku istražuje se kako troškovna učinkovitost i rizik utječu na tržišni udio u europskom bankarskom sektoru. Analiza je motivirana poznatom hipotezom učinkovitosti i teorijom strukture-vođenja-uspješnosti. Hipoteza je da su poboljšana učinkovitost i pojačani rizik banke povezani s rastom tržišnog udjela banke. U odnosu na ostala istraživanja, u ovoj analizi uključen je rizik kao odrednica tržišnog udjela. U istraživanju se koriste godišnji podaci za 36 banaka iz europskih zemalja u razdoblju od 2007. do 2015. godine. Rezultati pokazuju da su rizik i učinkovitost pozitivno povezani s tržišnim udjelom imovine, zajmova i depozita. Nadalje, istraživanjem je utvrđeno da su banke u tranzicijskim zemljama bile manje uspješne u pretvaranju prednosti u pogledu troškovne učinkovitosti u povećanje tržišnih udjela od banaka u razvijenim europskim zemljama. Empirijski model je procijenjen korištenjem GMM metode kako bi se uzela u obzir dinamička priroda istraživanih komponenti te s ciljem zaobilaženja problema endogenosti.

• Keywords: podjetništvo, banke, bančništvo, denarni trg, tveganje