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

Michael Koetter; James W. Kolari; Laura Spierdijk

doi:10.1162/REST_a_00155

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 journal › Article › Academic › peer-review

309 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 language	English
Pages (from-to)	462-480
Number of pages	19
Journal	The Review of Economics and Statistics
Volume	94
Issue number	2
DOIs	https://doi.org/10.1162/REST_a_00155
Publication status	Published - 2012
Externally published	Yes

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

Abstract

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