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The Impact of Consolidation and Modernisation on Banking Scale and Scope Economies

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  • Ali Awdeh
  • Chawki El-Moussawi
  • Wafaa Nasser

Abstract

Lebanese banks recorded an enormous increase in size, customers¡¯ base, and products variety over the past two decades, which suggests the development of economies of scale and scope in the Lebanese banking sector. This study aims at testing the presence of these economies of scale and scope in the Lebanese banking sector, particularly over the period 2000-2013. The estimation of a translogarithmic cost function by the maximum likelihood method shows that the Lebanese banks are ¨C in general ¨C characterised by the existence of increasing economies of scale. The analysis of economies of scope also reveals a complementarity between different outputs. Finally, the analysis of price elasticities of demand for production factors shows an important substitutability between labour and physical capital.

Suggested Citation

  • Ali Awdeh & Chawki El-Moussawi & Wafaa Nasser, 2016. "The Impact of Consolidation and Modernisation on Banking Scale and Scope Economies," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 8(5), pages 169-181, May.
    • Handle: RePEc:ibn:ijefaa:v:8:y:2016:i:5:p:169-181
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    References listed on IDEAS

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    Cited by:

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    More about this item

    Keywords

    economies of scale; economies of scope; elasticity of substitution; translog function;
    All these keywords.

    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

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