Competition and efficiency in UK banking: the impact of corporate ownership structure

This study analyses the changing efficiency, technological change and competitive market structure of the major retail stock (plc) banks and mutual building societies in the UK. Furthermore, by utilizing the interesting case studies of mutual building societies which have converted into plc banks during the sample period, we are able to gain valuable insights into the impact of corporate ownership structure on these issues. Hence, an important innovation to the literature is that we consider the changes in efficiency, technology and competition from a corporate governance perspective. We find that the relative performance of the three sets of institutions (banks, building societies and converters) varies considerably over the sample period, and that the plc conversion process appears to confer only a temporary benefit (in terms of relative performance) on converting mutual building societies. In addition, we find that the major retail financial institutions in the UK can be characterized as operating within a monopolistically competitive market structure. In contrast to most of the anecdotal evidence, however, this market appears to have become less, rather than more competitive, in recent years and this may be associated, at least in part, with the de-mutualisation of a large part of the building society sector.