IMPACT OF COMPETITION ON BANK EFFICIENCY: THE CASE OF EASTERN AND CENTRAL EUROPE

In this paper, we aim to study the effect of competition, and not concentration, on cost efficiency for the ece countries during the 1999-2006 period. To do so, we will use two different measures of bank market power: the first one is the Panzar and Ross H-statistic but calculated for each individual bank and the second one is the Lerner index. Our findings show that the cost efficiency of banks increases when the level of competition decreases, leading to wonder what should be the optimal level of competition that regulators should implement.