Enjoying the quiet life under deregulation? Evidence from adjusted lerner indices for U.S. banks

Michael Koetter*, James W. Kolari, Laura Spierdijk

*Corresponding author for this work

Research output: Contribution to journalArticleAcademicpeer-review

208 Citations (Scopus)

Abstract

The quiet life hypothesis posits that firms with market power incur inefficiencies rather than reap monopolistic rents. We propose a simple adjustment to Lerner indices to account for the possibility of forgone rents to test this hypothesis. For a large sample of U.S. commercial banks, we find that adjusted Lerner indices are significantly larger than conventional Lerner indices and trending upward over time. Instrumental variable regressions reject the quiet life hypothesis for cost inefficiencies. However, Lerner indices adjusted for profit inefficiencies reveal a quiet life among U.S. banks.

Original languageEnglish
Pages (from-to)462-480
Number of pages19
JournalReview of Economics and Statistics
Volume94
Issue number2
DOIs
Publication statusPublished - 2012
Externally publishedYes

Fingerprint

Dive into the research topics of 'Enjoying the quiet life under deregulation? Evidence from adjusted lerner indices for U.S. banks'. Together they form a unique fingerprint.

Cite this