Competition and Banks

An Analysis of Competition, Efficiency and Soundness in the South African Banking Sector

The main aim of this study was to investigate the relationship between competition and efficiency in the South African banking sector, then go further, and see how these variables affect bank soundness. Results show that the impact of competition on efficiency depends on the measure of competition used. When using the Lerner index there is a negative effect of competition on efficiency whilst the opposite is true when using the Boone indicator. In the case of bank soundness, our results are partly consistent with what other researchers have found.

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