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Prior research on the structure‐performance relationship has not investigated all of the relevant relationships among market structure, profits, prices, and explicitly calculated measures of firm efficiency. This paper replicates the four approaches in the literature, adds several innovations, and applies the analysis to banking data. We find more support for the structure‐conduct‐performance hypothesis than for the relative‐market‐power and efficient‐structure hypotheses, although the data are not fully consistent with any of these theories. We also find support for Hick's quiet‐life hypothesis, which implies that firms with market power adhere less rigorously to efficiency maximization. J.E.L. Classification Numbers G21, G28, L41, L89 The opinions expressed do not necessarily reflect those of the Board of Governors or its staff. The authors thank Dean Amel, Jim Berkovec, Myron Kwast, Nellie Liang, LenNakamura, Steve Rhoades, and participants in the meeting of the Federal Reserve System Committee on Financial Structure and Regulation for helpful comments, and Ken Cavalluzzo, Jalal Akhavein, John Leusner, and Seth Bonime for outstanding research assistance.

The purpose of this paper is to empirically investigate the influence of corporate governance variables relating to the board of directors, audit and ownership on the agency problems that inflict a firm's investments in capital and research and development (R&D) expenditures. This study posits that the R&D investments are inflicted by the agency problem of “quiet life” whereas “empire-building” agency problem affects capital expenditure decisions.

This study analyses the investment behaviour of non-financial and non-utility firms listed on NIFTY 200 from FY 2009 to FY 2018 using a static and dynamic model.

The results from the static model suggest that ownership concentration mitigates the agency problem of the “quiet life” that affects R&D expenditures. However, no corporate governance attribute has a significant impact on R&D investments under the assumption of the dynamic model. In respect of capital expenditures, the analysis of static model yields that audits by large auditor firms and usage of non-audit services ameliorate the agency problem of “empire-building”. The results from the dynamic model show that independent boards worsen it. They also continue to provide empirical evidence in favour of large auditors.

This paper contributes to the literature on the corporate governance-investment association by simultaneously examining the impact of multiple corporate governance attributes on the agency problems of “quiet life” and “empire-building” that affect R&D and capital expenditures, respectively, in a static and dynamic context for a sample of Indian firms.

The study examines the relationship between the consequential social cost of market power (i.e. welfare performance of banks) and cost efficiency using data covering the period 2009 to 2017 from the Ghanaian banking industry.

The study adopts the ordinary least squares (OLS), fixed effect (FE) panel regression and the quantile regression (QR) approaches to control for heterogeneity and provide increased room for policy relevance. The two-stage least squares instrumental variables (2SLS-IV) regression is used to ensure the robustness of the findings against the problem of possible reverse causality.

The results indicate a positive relationship between banks' welfare performance and cost efficiency, which suggests that greater cost efficiency hedges welfare losses. In other words, welfare gains and cost-efficient banks are not mutually exclusive. Also, the results show evidence that the sensitivity of welfare gain to cost efficiency depends on the knowledge of local market dynamics. Further, the findings from the QR estimation suggest that, but for welfare loss at low (Q.25) to the median (Q.50) quantiles, cost efficiency is a necessary and sufficient condition to hedge the welfare losses.

The results demonstrate that financial consumer protection cannot be achieved without cost efficiency in the presence of both foreign banks and high market knowledge. Therefore, our paper suggests an integrated cost efficiency policy approach that has the complementary effect of a robust information sharing mechanism and incentives to hedge against welfare losses in the banking sector of emerging economies. Moreover, if welfare gain is synonymous with cost-efficient banks, then the presence of a quiet life is typical of financial consumer protection.

This study provides insight into the importance of cost efficiency to the public policy of financial consumer protection in an era of foreign banks' dominance. From the review of prior literature, this paper is the first to apply the QR estimation technique to examine the effect of cost efficiency throughout the conditional distribution of bank welfare performance rather than just the conditional mean effect of cost efficiency.

The purpose of this paper is to analyze the performance of banking institutions in Costa Rica over the period 2004–2014.

This paper employs system GMM, dynamic panel data and traditional financial hypothesis framework to analyze bank performance and assess marketplace sustainability for a sample of commercial and cooperative banks from Costa Rica. In the assessment, the authors visit the relative market power, structure conduct performance (SCP) and efficient structure literature.

Market share (MS) is positively related to performance whereas the authors find a negative effect of market concentration (Herfindahl–Hirschman index) on bank profits, thereby refuting the SCP hypothesis. The authors accept the “quiet life” hypothesis within Costa Rican banks since a moderate level of profit persistence is detected. Commercial banks are less profitable. Yet when crisis is introduced to the models, it has a significant and negative impact on overall bank performance.

The authors selected years and banks based on available data plus default information in the relevant database. More insights can be gained from post-2014 developments.

The current results and conclusions have implications for developing economies (and economic development, in general) by showing that the traditional understanding of cooperative bank model as better for the public good may not be necessarily true. They offer insight into the understanding of how different bank-type institutions affect the public good. Furthermore, expanding the research to Latin America in order to directly compare commercial and cooperative enterprises via a meta-frontier technique would help buttress this evidence.

This is the most recent study to provide such an investigation for a Latin American country with a sizable MS for cooperative and public sector banks. The paper offers analysis that has been limited in Latin American banking markets thus far.

The purpose of this paper is to examine the empirical effect of competition on cost and profit efficiency in the South African non-life insurance market in a three-stage analysis.

Using annual firm level data on 80 non-life insurance companies from 2007 to 2012, the authors first employ the stochastic frontier analysis (SFA) to estimate cost and profit efficiency scores. In the second stage, the authors measure insurance market competition using the Panzar-Rosse (P-R) H-statistics. In the final stage, the authors estimate a fixed-effects panel regression model which controls for heteroskedasticity to examine the effect of competition on the estimated efficiency scores. Firm size, diversification, age, risk, reinsurance and leverage are employed as control variables.

From the SFA, the authors find average cost and profit efficiency of 80.08 and 45.71 per cent, respectively. This suggests that non-life insurers have high levels of efficiency in cost and low efficiency in profit. The annual estimates of the P-R H-statistics also suggest that firms in the market earn revenues under conditions of monopolistic competition. The authors find a positive effect of competition on cost and profit efficiency to validate the “quiet-life” hypothesis which posits that competition improves efficiency.

Regulatory policies should be directed towards enhancing competition to improve on the low profit earning potential of firms in the non-life market.

To the best of the authors’ knowledge, this study presents the first application of a non-structural measure of competition to examine the empirical relationship between competition and efficiency in insurance markets.

This paper investigates the relationship between market power and efficiency for Indian banks in order to test the validity of the quiet life hypothesis (QLH) during 2005–2019.

First, the bank-level DEA efficiency scores and three measures of the Lerner index: traditional, efficiency-adjusted, stochastic are estimated. Then, efficiency scores are regressed on Lerner indices plus a set of banking and economic control variables.

Robust evidence against the QLH is obtained. Moreover, the conventional Lerner index suggests that market power of Indian banks, as well as of the different bank groups, increased during the study period, due to a greater reduction in costs compared to that of the price of banking services. The efficiency scores also declined for the banking system as a whole, and for all bank groups except new private banks.

This is the first study testing the QLH for the different categories of Indian banks and also provides robust inferences by using both stochastic and non-stochastic measures of market power.

Quiet life hypothesis (QLH) states that banks with a higher market power will generate high profitability quietly, even though it could cause inefficiency. In the long term, it could turn a high profitability into a lower future profitability. This paper identifies QLH-reborn through the holdinglisation strategy of the Indonesian Government to include all state-owned banks into one holding, hence increasing the market power of Indonesian state-owned banks within ASEAN. Optimum profitability and optimum efficiency are the objectives of the “holdinglisation” idea. Therefore, the purpose of this paper is to analyse the relevance of holdinglisation within the Indonesian banking industry.

This paper focusses on analysing the efficiency and soundness of four state-owned conventional banks and four state-owned Islamic banks in Indonesia during 2011–2015. Subsequently, this paper analyses the impact of bank effectiveness index and soundness rank on return on average asset (ROAA) and ROAE through the data panel of general least square regression using STATA.

This paper shows that all state-owned commercial banks in Indonesia during 2011–2015 are efficient and sound. Furthermore, this paper finds that market power (market share for deposit and market share for loans) has an insignificant impact on bank efficiency (BE) index, bank soundness rating, ROAA and EM. Meanwhile, BE index and BS rating have a significant impact on ROAA. Therefore, this paper concludes that holdinglisation regulation as QLH-reborn is irrelevant for Indonesian state-owned banks at this moment.

This paper has a crucial limitation. Holdinglisation as QLH-reborn is irrelevant under the condition that all state-owned commercial banks in Indonesia are efficient and sound. Moreover, this paper contributes another actual empirical study of QLH.

This paper represents a scientific argumentation towards a holdinglisation strategy of state-owned commercial banks in Indonesia. Therefore, this paper could be a scientific reference for the Indonesian Government to improve Indonesian state-owned commercial banks competitiveness in ASEAN.

This paper is urgently needed for the Indonesian banking industry because the Indonesian Government should consider the drawbacks of holdinglisation as QLH reborn to the Indonesian banking industry, such as inefficiency and the risks of financial failure. Moreover, if the bank experiences financial failure, it could have a detrimental and lasting effect on the country’s macroeconomic condition.

In this study, we test the so-called “Quiet Life Hypothesis” (QLH), which postulates that banks with market power are less efficient.

We employ instrumental variable Ordinary Least Squares, Fixed Effects, Tobit and Logistic regressions. The empirical evidence is based on a panel of 162 banks consisting of 42 African countries for the period 2001–2011. There is a two-step analytical procedure. First, we estimate Lerner indices and cost efficiency scores. Then, we regress cost efficiency scores on Lerner indices contingent on bank characteristics, market features and the unobserved heterogeneity.

The empirical evidence does not support the QLH because market power is positively associated with cost efficiency.

Owing to data availability constraints, this is one of the few studies to test the QLH in African banking.

This study examines the relationship between banks' competition performance and risk-taking behavior concerning the impacts of bank size and the recent global financial crisis. The analysis empirically uses dynamic panel data from 1137 banks of the BRICS countries (i.e. Brazil Russia India China and South Africa) for the period 2000–2015.

Dynamic panel generalized method of moments (GMM) has been used primarily to examine the effect of bank competition on performance and risk-taking. Later the paper validates the core results by using three-stage least squares (3SLS) and incorporating alternative measure of competition in baseline equations.

This study confirms the significant impact of competition that complies with the structure-conduct-performance hypothesis quiet life hypothesis and “competition fragility” view. However, the key robust results are as follows: (1) in competitive markets large banks are more efficient than small banks; (2) there is a nonlinear relationship between competition performance and risk; (3) across bank size competition heterogeneously affects profitability efficiency risk and stability; (4) notably small banks are as efficient as large banks during crisis but shared with risk; and (5) small banks also stable during crisis in highly concentrated markets but less stable in competitive environments.

This study promotes higher market power for the bank's profitability and financial stability. More intently policymakers should nurture both cost and revenue efficiency for large banks as these are less efficient than small banks in concentrated markets though these banks produce risk. Hence those banks should be cautious to minimize non-performing loans and maximize stability regarding financial and efficiency. Based on the nonlinear pattern of competition the regulators should adopt different policies for short and long run. It also recommends encouraging commercial and cooperative banks in the BRICS region as these are more efficient risk-averse and better stabilized than other types of banks.

A good number of studies are available in the current literature which examines the impact of bank competition on either bank performance or risk-taking in a single country or cross country analysis. However, very few studies examine the relationship between bank performance and risk-taking behavior concerning the impacts of competition (non-linear and quadratic) size financial crisis and ownership structure together. Moreover, there is a dearth of literature on this topic that built on BRICS economies.

This study explores whether product market competition is a substitute for or complementary to good internal governance through promoter holdings. Specifically, it examines the impact of product market competition on the linkage between promoter ownership and firm value and investigates whether this impact varies with the type of blockholders and level of ownership.

The authors used a fixed-effect panel regression method to analyze 1,136 National Stock Exchange-listed firms with 10,770 observations between the years 2005 and 2017. The authors computed product market competition using the Hirschman–Herfindahl Index and used the two-stage least squares regression model to address the issue of endogeneity.

Competition is a substitute for good corporate governance, especially in highly competitive industries, while promoters enhance firm value only in less competitive industries. This supports the theory that competition hinders a manager's “quiet life” hypothesis and creates disciplinary pressure to perform well. Additionally, the authors find that competition acts as a complement to promoters who are state-owned blockholders, while it acts as a substitute for promoters who are family-owned and private-owned blockholders.

This is possibly among the earliest attempts to integrate promoter ownership, product market competition, and firm value with the type of blockholder, especially in the context of the Indian market after 2005. The authors also provide evidence of situations in which both external and internal governance mechanisms either synergize or mitigate each other.