Testing the 'Quiet Life' Hypothesis in the Italian Banking Industry

In this paper we test the so‐called ‘quiet life’ hypothesis (QLH), according to which firms with market power are less efficient. Using data on the Italian banking industry for the period 1992–2007, we apply a two‐step procedure. First we estimate bank‐level cost efficiency scores and Lerner indices...

Full description

Saved in:
Bibliographic Details
Published in:Economic notes - Monte Paschi Siena 2010-11, Vol.39 (3), p.173-202
Main Authors: Coccorese, Paolo, Pellecchia, Alfonso
Format: Article
Language:English
Subjects:
Banking industry
Cost control
D40
Efficiency
G21
Hypotheses
L10
Oligopoly
Organizational structure
Studies
Citations: Items that this one cites
Items that cite this one
Online Access:Get full text
Tags: Add Tag
No Tags, Be the first to tag this record!
Description
Summary:In this paper we test the so‐called ‘quiet life’ hypothesis (QLH), according to which firms with market power are less efficient. Using data on the Italian banking industry for the period 1992–2007, we apply a two‐step procedure. First we estimate bank‐level cost efficiency scores and Lerner indices. Then we use the estimated market power measures, as well as a vector of control variables, to explain cost efficiency. Our empirical evidence supports the QLH, although the impact of market power on efficiency is not particularly remarkable in magnitude.
ISSN:0391-5026
1468-0300
DOI:10.1111/j.1468-0300.2011.00227.x