Investigating Competitive Ability of the Banking Industry by Using Adjustable Lerner & Boon Indicators

Banks are considered as the most important institutions of the money and capital market in each country's economic development process, and It is impossible to sustain the rapid growth of a country without regard to the market structure of such an institution. In this regard, the assessment of the degree of market power of the banking system is of great importance. In this study, the competition in the banking system of 158 countries is estimated to be between 1998 and 2015. For this purpose, we have used two Adjustable Lerner & Boon Indicators. In order to estimate the final cost of these indices, the translog cost function has been used with regard to technological progress as a trend variable. The results of both indicators indicate that marketability declined from 2004 to 2007, but increased in 2008 and 2009. This process shows that the level of banking competition is related to the business cycle. The empirical results also highlighted the significant differences between the regional and the income groups of the countries: the banking system of the countries of Europe and Central Asia have the highest competitive capability, the banking system in sub-Saharan Africa has a relatively stable competitive power. However, competitive ability in the countries of Europe and Central Asia (according to the adjusted Lerner index) and South Asia (according to the Boone index) have been fluctuating greatly.