Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/83899
Authors: 
Matthews, Kent
Murinde, Victor
Zhao, Tianshu
Year of Publication: 
2006
Series/Report no.: 
Cardiff Economics Working Papers E2006/6
Abstract: 
We undertake an empirical assessment of the competitiveness and market contestability of the major British banks post-1980 – a period of major structural changes, mergers, demutualizations and acquisitions. Specifically, we estimate and test the Rosse-Panzar model on a panel of 12 banks for the period 1980-2004; furthermore, we buttress the Rosse-Panzar methodology by estimating the ratio of Lerner indices obtained from interest rate setting equations. The sample of banks corresponds closely to the major British Banking Groups as specified by the British Banking Association. Our results confirm the consensus finding that the British banking market can be described as monopolistically competitive. We also find that on the core business of balance sheet activity, British banks have remained as competitive in the 1990s as in the 1980s. This finding is further supported by evidence from the ratio of Lerner indices for loans and deposits. However, we find a significant worsening of competitiveness on the non-core (off-balance sheet) business of the banks.
Subjects: 
Competitive conditions
market contestability
British banking
JEL: 
G21
D43
C51
Document Type: 
Working Paper

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