Chapter 13: Banking and Monetary Policies

Title: The relationship of efficiency and competition in the banking industry: the case of European banks

Reference: WORLD SUSTAINABLE DEVELOPMENT OUTLOOK 2006 pp. 406 - 417

Abstract/Summary: The objective of this study is to bring more light on the intriguing relationship between competition and banking efficiency, by testing this "efficient-structure" hypothesis not only for the EU countries, but also for the European Economic Area (EEA) countries during the period 1996–2002. The results revealed that the relation between the two variables does not remain constant through time. Upto 1999 the correlation coefficient between competition and efficiency is negative, while for the years 2000 and 2001 it is positive. For the whole sample the correlation coefficient is positive but not statistically significant implying a negative but not statistically important relationship between competition and efficiency.

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