Structure and performance in the Portuguese banking industry in the nineties

Byline: Victor Mendes (1), Joao Rebelo (2) Keywords: Banking; Efficiency; Structure-performance; Portugal Abstract: In this paper we study the structure-performance relationship in the Portuguese banking industry during the nineties. The hypothesis of pure collusion, efficient structure, modified efficient structure and hybrid collusion/efficiency are tested using a direct measure of efficiency. Our results endorse the hybrid collusion/efficiency hypothesis in the first half of the nineties. However, after 1994 results lend some support to the modified efficient structure hypothesis. Competition at the local level remains important throughout the decade, suggesting that banks in less competitive local markets exert some level of market power and exhibit superior performances. Author Affiliation: (1) Faculdade de Economia, CEMPRE, Universidade do Porto, R. Dr. Roberto Frias, 4200, Porto, Portugal (2) Departamento de Economia e Sociologia, Universidade de Tras-os-Montes e Alto Douro, Vila Real, Portugal Article History: Registration Date: 01/01/2002 Article note: Received: November 1999, Accepted: February 2003, JEL Classification: Correspondence to: Victor Mendes The authors wish to thank Pedro Pita Barros and two anonymous referees for helpful comments. The usual disclaimer applies. Financial support from JNICT - Junta Nacional de Investigacao Cientifica e Tecnologica (grant PCSH/ECO/938/95) is acknowledged.