Acta Univ. Agric. Silvic. Mendelianae Brun. 2013, 61(7), 2701-2707 | DOI: 10.11118/actaun201361072701

Relationship between competition and efficiency in the Czech banking industry

Iveta Řepková, Daniel Stavárek
Silesian University in Opava, School of Business Administration in Karvina, Department of Finance, Univerzitní náměstí 1934/3, 733 40 Karviná, Czech Republic

The aim of the paper is to estimate the relationship between competition and efficiency in the Czech banking industry in the period 2001-2010. The theoretical definition and literature review of the relationship between banking competition and efficiency is included. Lerner index and Data Envelopment Analysis were used to estimate the degree of competition and efficiency in the Czech banking sector. The market structure of the Czech banking industry was estimated as a monopolistic competition and it was found a slight increase in the competition in the banking sector. The efficiency of the Czech banks increased in the analysed period. Using a Johansen cointegration test, the paper contributes to the empirical literature, testing not only the causality running from competition to efficiency, but also the reverse effect running from efficiency to competition. The positive relationship between competition and efficiency was estimated in the Czech banking sector. These findings are in line with the Quiet Life Hypothesis and the suggestions that the increase of the competition will contribute to efficiency.

Keywords: banking sector, competition, efficiency, Lerner index, Data Envelopment Analysis, Johansen cointegration test
Grants and funding:

This paper was support by the Czech Science Foundation within the project GAČR 13-03783S 'Banking Sector and Monetary Policy: Lessons from New EU Countries after Ten Years of Membership'.

Received: April 11, 2013; Published: December 24, 2013  Show citation

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Řepková, I., & Stavárek, D. (2013). Relationship between competition and efficiency in the Czech banking industry. Acta Universitatis Agriculturae et Silviculturae Mendelianae Brunensis, 61(7), 2701-2707. doi: 10.11118/actaun201361072701
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