Sonia León

The use of efficiency measures to compute welfare improving: an application for competition policy

Purpose Merger approving focuses on both market power and welfare gains. In general, the approval process does not include a comparative efficiency analysis. This paper aims to introduce this dimension and show its potential. Design/methodology/approach Based on the analysis of past bank mergers, the authors examine expected and actual efficiency gains. This paper measures the potential (ex ante) and ex post efficiency gains of bank mergers by using data envelopment analysis (DEA). Findings The authors find some (approved) mergers were promised and yielded efficiency gains while others did not. Research limitations/implications DEA does not allow testing statistically the significance of the presumed relationship between variables. Practical implications The authors conclude that some mergers that took place would not have been approved had an efficiency analysis been made. Social implications Regulators and/or competition authorities could approve mergers which do not increase efficiency. Originality/value To date, efficiency frontier analysis has not been performed for merger approval. It implies that the regulator or competition authority could allow mergers with no clear social gains.

From scratch to efficiency gains after a financial crisis? A tale of a restructured banking system

Abstract We study the efficiency of the Argentine banking system after the 2001–2002 crisis. The financial system had to be restructured from scratch and recovered jointly with the economy, but its productivity and average cost levels have been stagnant since 2007. The analysis includes efficiency frontier estimations for retail banks and a comparison of subsamples for different categories of banks for the period 2005–15. We try to determine whether public banks are more efficient than private ones, whether privatized are more efficient than always private, as well as national versus foreign entities. Our findings show a modest average efficiency of the system and quite similar efficiency rankings for the different groups of banks. On average, public tend to be slightly more cost efficient than private, and national are slightly more efficient than foreign.