Branching and competition in the European banking industry

In this study branching costs and competitiveness of European banks are measured by fitting a monopolistic competition model to a representative sample drawn from nine EEC banking industries in the period from 1990 to 1996. In the theoretical model, banks decide strategically the size of their branching network anticipating the degree of competition faced on interest rates. From the structural equations of the model an econometric test is derived in order to measure branching costs and degree of competition in banking services. The empirical analysis captures their changing over time together with the impact of various European directives aiming at deregulating the banking industry. Furthermore the study shows persistence of segmentation acoss EEC banking industries.     

The Brazilian Soccer Championship: an efficiency analysis

This article analyses the top Brazilian football league from 2003 to 2011 by estimating a cost function and using a stochastic frontier model. Among the covariates, the number of fans per club and club remoteness is taken into account. The Brazilian clubs are then ranked according to their technical efficiency during the 2000–2011 period. Based on the results, the policy implication is presented, and the economic implications arising from the study are also considered.     

Market orientation and performance in the biotechnology industry: An exploratory empirical analysis

The purpose ofthis study was to conduct an exploratory investigation into the link between market orientation and business performance in the biotechnology sector. Based on the nature and character of the biotechnology industry, a multi-faceted scale of market orientation was derived from a preuiously tested and refined measure of the construct. Data were generated from 62 biotechnolog firms and a variety of market orientation-performance relationships were investigated, alongside other potential effects on the different dimensions of business performance. The findings indicate that market orientation is positively and signficanttly associated with three of the four performance measures examined. Implications of our findings for biotechnology industry managers are discussed and limitations of the study as well as future research directions are addressed.     

Service quality in Brazilian mobile telephony: an efficiency frontier analysis

The mobile telephony sector is characterized by the dynamic interplay of rapid changes in technology and an apparently growing competition, as indicated by the fierce nonprice competition, and is yet associated with the entry of new operating companies in some cases. In this context, a relevant and neglected issue is the assessment of how service quality responded to an increasingly competitive environment. This study utilizes data envelopment analysis to assess the quality efficiency of mobile telephony companies in Brazil during the 2000–2003 period. Window analysis was conducted for the entire period, taking as reference different quality indicators pertaining to different forms of complaints and calls completed and interrupted. The efficiency measurement was made feasible by interpreting the indicators reflecting a positive dimension of quality as outputs and those reflecting negative aspects of quality as inputs. Given potential heterogeneities across firms that relate to the frequency band and to the technology (time division multiple access technology and code division multiple access technology among others), this article considered adjusted efficiency scores. The Tobit model for censored data was estimated to control for the aforementioned aspects. Rescaled residuals from the econometric estimation produced efficiency scores for service quality. The evidence indicated an overall improvement in efficiency over time. Nonparametric tests were consistent with a positive evolution of quality over time even for shorter subperiods.     

Privatization and optimal share release in the Chinese banking industry

This paper establishes a mixed oligopoly model to explore how the government determines the percentage of shares of the state-owned banks to be released to foreign investors under the goal of seeking to maximize social welfare. The theoretical model finds that the release of shares of state-owned banks to foreign investors will reduce the outputs of the state-owned banks. The direction of the change in the profitability of the state-owned banks depends on the percentage of the shares released. The direction of the changes in the levels of social welfare also varies. If the gap in production efficiency between the state-owned banks and private banks is not large enough, we can be certain that a partial release of shares is the government's best policy.     

The duration of new firms in banking: an application of Cox regression analysis

This paper studies the duration of two cohorts of entrants in the Italian financial intermediation industry. Using the Cox (1972) Proportional Hazards Model, it analyses the link between duration of each newborn firm and its start-up size, as well as a series of industry-specific characteristics. It emerges that not only did regulatory reform in 1990 result in a process of branch proliferation and industry concentration, but it also set in motion a pre-entry selection mechanism. Conversely, before completion of the regulatory reform, in 1989, entry was possible even for very small firms, and larger new entrants survived longer than their smaller counterparts, and this independently of the features of spatial and structural competition. First version received: Nov. 98/final version received: Oct. 99     

Bank size,competition and risk in the Turkish banking industry

This paper investigates the impact of bank size and competition on earnings volatility and insolvency risk using quarterly data for commercial banks operating in the Turkish banking industry for the period 2002Q1–2012Q2. The main result of the paper indicates that bank size and earnings volatility are negatively related, suggesting that larger banks are less risky. The results also indicate that competition measured by the Boone indicator increases earnings volatility. The results further suggest that higher capitalized banks, banks with a higher share of non-interest income in total income and efficient banks face lower earnings volatility. Finally, insolvency risk measured by Z-score and bank size are positively related, suggesting that larger banks are more stable.     

Inflation expectations of Brazilian consumers: an analysis based on the FGV survey

ABSTRACT

An accurate assessment of inflation expectations is crucial for the management of monetary policies. However, expectations are not directly observed and are hence normally inferred either from the interest rate structure or from surveys of professional forecasters. Alternatively, a direct measure may be obtained from consumer surveys. The aim of this paper is to study the formation of inflation expectations in Brazil, using a novel dataset based on the FGV/IBRE consumer survey. Basing our model on the rational inattention hypothesis, we find that individual heterogeneity plays a very significant role in shaping individual expectations; also, Brazilians adjust expectations to current inflation and to a fixed reference value, while professional forecasts do not play a very relevant role.     

Regulating the banking industry in transition economies: Exploring interactions between capital and reserve requirements

This paper examines the ‘prudential' role of reserve requirements in transition economies using a general-equilibrium banking model. The analysis stresses the role that reserve requirements may play in enforcing an adequate level of bank capitalization in a context in which it is difficult to assess the true value of bank assets. The paper also explores the interactions that exist between capital and reserve requirements and the effect of these regulations on the financial structure of banks and on the level of credit and interest rates.     

Profit margins and business cycles in the Brazilian industry: a panel data study

The paper investigates the relationship between profit margins and business cycle in the Brazilian industry during the 1992–1998 period, taking as reference a dynamic panel data model founded around a conjectural variation framework. The empirical results indicate procyclical behaviour of profit margins for the aggregate business cycle but is less clear in the case of sector-specific business cycle variables. Among the most robust results, one can highlight the roles of lagged profitability and import intensity and the negligible role of union density. Schmalensee in (American Economic Review 75, pp. 341–51) outlined three theoretical interpretations associated with the empirical model (classical, revisionist and managerial). Econometric tests on the related restrictions do not allow one to exclusively legitimate any of the three interpretations.     

Technology acquisition models for fast followers in high-technological markets: an empirical analysis of the LED industry

The rapid rate of technology obsolescence in many high-technology markets makes it imperative for firms to renew their technological bases constantly. Given its critical importance, the technology acquisition from the fast followers’ perspective needs to be the subject of careful analysis. This paper aims to identify the factors influencing fast-follower firms’ choice of technology acquisition model, using a multi-factorial analysis and taking into account their technological capabilities, marketing capabilities, and environmental risk tradeoffs. This study sourced data from the Securities Data Company (SDC) Platinum Database for a total of 205 instances of technological cooperation between technology holders and fast followers in the LED industry. Based on the empirical results, some significant findings were found. First, regarding technological capabilities, when fast-follower firms had greater R&D, complementary manufacturing capabilities, and technological similarities with the partners, they preferred the acquisition model that required higher resource commitments. Secondly, when fast followers had marketing channel advantages, they were more likely to choose a high resource-commitment acquisition model to obtain time-to-market benefits.     

The persistence of profits in banking: an international comparison

This article examines the dynamics of bank profitability in the USA, Germany, Great Britain, France, Italy and Switzerland over the period 1993–2014. We find long-run bank profit persistence in all six countries in the period before the financial crisis in 2008. Banks with large capital ratios are persistently more profitable, and there is little evidence of a link between bank size and the persistence of bank profits. Commercial (saving) banks are persistently more (less) profitable in four of the six countries. The effects of the financial crisis in 2008 differed dramatically across countries as well as across ownership types. While US banks experienced dramatic declines in the immediate aftermath of the crisis, they recovered much faster than their European counterparts and essentially retain their long run profit potential by the year 2014.     

Prices and market structure: an empirical analysis of the supermarket industry in Chile

This article investigates empirically the relationship between market structure and consumer prices in the supermarket industry in Chile. A panel of monthly data from 16 cities in the period January 1998–September 2006 is used. We find that, the more concentrated the industry in a city, the higher the prices, while the participation of major national chains in cities tends to lower prices. In terms of magnitude, this latter effect prevails over the former. Moreover, the dominant local chain is found to behave differently depending on whether or not one of the national chains is present in the city. Finally, we find that prices rise when a national chain acquires another chain and both were previously in a city (inmerge) while if only one of the two was present (outmerge), prices fall.     

Market share instability and stock price volatility during the industry life-cycle: the US automobile industry

Market share instability, during certain stages of the industry life-cycle, has become a stylized fact in the industrial organization literature. In the finance literature, volatility in the form of excess volatility, i.e. the much larger volatility of stock prices than dividends (although stock prices should in theory trace the present value of future dividends), has given rise to controversies regarding stock price determination (Campbell and Shiller, 1988; Shiller, 1989). Recent evolutionary models, both theoretical and empirical, have tied the presence of market share instability to industry specific variables, such as specific periods in the industry life-cycle and specific “technological regimes”. The object of the paper is to explore whether there is a relationship between market share instability and stock price volatility and to what degree this relationship is connected to the concept of the industry life-cycle, and hence to industry specific factors. To do so, we explore the relationship in one particular industry, the US automobile industry. Since neither life-cycle nor finance theories attack this problem directly, we use insights from both approaches to build hypotheses which guide the data analysis. The empirical results confirm many of these hypotheses, suggesting that the degree of excess volatility is indeed partly affected by industry specific factors.