Has the Financial Crisis had an Adverse Effect on Bank Competition?

Abstract

This article investigates whether the recent financial crisis has had any adverse impact on bank competition for 24 emerging and 25 advanced countries with large and small-size banks over the sample period 2001-2010. The H-statistic advocated by Panzar and Rosse (1987) is employed as the measure of competition. We find that the adverse effect of the financial crisis on bank competition seems to be trivial and on the contrary, competition is marginally boosted during the crisis period. This applies to both types of economies, irrespective of bank size. This suggests that currently ongoing policies to avert further crises in the banking sector have not exerted so great an adverse effect on competition. In the individual countries' study, the recent global financial crisis, however, led to a significant decline in competition in some countries.