Journal of Banking & Finance Vol. 33 No. 12 2009
Competition in banking: A disequilibrium approach
Abstract
The Rosse–Panzar revenue test for competitive conditions in banking is based on observation of the impact on bank revenue of variation in factor input prices. We identify the implications for the H-statistic of misspecification bias in the revenue equation, arising when adjustment towards market equilibrium is partial and not instantaneous. In simulations, fixed effects estimation produces a measured H-statistic that is severely biased towards zero. Empirical results for the banking sectors of the Group of Seven (G7) countries corroborate our principal finding, that a dynamic formulation of the revenue equation is required for accurate identification of the H-statistic.
- DOI
- 10.1016/j.jbankfin.2009.06.003
- Volume
- 33
- Issue
- 12
- Pages
- 2282-2292
- Language
- en
- Sources
- openalex crossref bibtex:phds-export.bib