ABSTRACT
Market power and efficiency are known to affect baking profitability. However, they have been usually analysed separately and when jointly, under a linear approach. This letter proposes a non-linear assessment of these two variables over bank profitability. For this, we use a GMM approach and find diminishing returns of market power and increasing returns of efficiency over profitability gains. Our findings add evidence besides the traditional view which may have important implications for banking system.
Acknowledgments
The authors acknowledge the comments from the editor and the anonymous referee that help us to improve the letter. S. Camino-Mogro acknowledges funding from the Spanish Ministry of Economy and Competitiveness (project ECO2017-82445-R).
Disclosure statement
No potential conflict of interest was reported by the authors.
Correction Statement
This article has been republished with minor changes. These changes do not impact the academic content of the article.