AFFI International Conference 2017

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COMPETITION, SECURITIZATION, AND EFFICIENCY IN U.S. BANKS

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Using a sample of 74,533 U.S. commercial bank observations from the Call Report of Condition and Income, we investigate the impact of competition and securitization on cost and technical efficiency. We find that market power, as measured by the Lerner index, increases U.S. banks‟ overall cost and technical efficiency. Additional tests empirically confirm a negative and significant impact of securitization, particularly after the recent financial crisis, on efficiency. We also show that higher incentives to securitize loans in the most restricted and concentrated states reduce banks‟ overall efficiency. All these results are in favor of the Dodd-Frank Act and may help regulators to avoid the inefficiency consequences of securitization by contributing to a sustainable quality of U.S. loans.

Author(s):

Antonio Bayeh    
University of Grenoble Alpes
France

Radu Burlacu    
University of Grenoble Alpes
France

Mohammad Bitar    
Concordia University
Canada

Thomas Walker    
Concordia University
Canada

 

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