The European consumer credit industry: determinants of performance

Despite the relevance gained by the consumer credit industry since the 2000s and its importance in supporting the financial needs of households, there is very little evidence on how this industry has performed over the years. This paper fills a gap in the literature by providing updated evidence through a dynamic generalised method of moments (GMM) estimation of the determinants of performance, measured as profitability and as cost efficiency, in a sample of European consumer credit companies over the period 2005-2014. Results show that both firm-specific and market-specific features influence the performance. Among these, larger size contributes to enhanced performance, while credit risk has a strong deleterious effect. The negative effect prevails also for the market household debt. On the contrary, credit diffusion has a positive impact both on profitability and efficiency.