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Empirical evaluation of ‘structure-conduct-performance’ and ‘efficient-structure’ paradigms in banking sector of Pakistan
Abstract
Historically, the banking sector of Pakistan has been characterized by credit ceilings, directed and subsidized credit, controlled interest rates and lacking competition. This scenario prevailed till the financial sector reforms in 1990. However, after 1990, the banking sector changed significantly and the reforms led to notable improvement in the indicators of market structure of the banking industry of the country. In literature, the changes in indicators of market structure are interpreted in the context of either structure-conduct-performance (SCP) or relative market power (RMP) paradigm, and/or in relation to the efficient structure (ES) hypothesis. This paper studies relevance of SCP, RMP and ES paradigms for banking industry of Pakistan. This study uses (balanced) panel data, spanning 1996 to 2015, of 24 commercial banks to estimate banks’ profit function by using fixed effects model. Findings suggest that: (a) there is a weak association between the indicators of market structure and banks’ performance; (b) there is no empirical evidence to support SCP or RMP paradigms; and (c) the ES paradigm is relevant in the case of banking sector of Pakistan. Thus, the focus of policymakers should be to improve the efficiency of the banking sector in Pakistan. Focus on improving indicators of market structure, like concentration ratios, to encourage competition in the banking sector may not be productive.
... According to Gonzalez et al. (2019), if the four largest companies control at least the sales market share of the industry concerned, the industrial structure is categorise oligopoly. But Khan and Hanif (2018) state that a rule of thumb is that an oligopoly exis ...
... According to Gonzalez et al. (2019), if the four largest companies control at least 40% the sales market share of the industry concerned, the industrial structure is categorised a oligopoly. But Khan and Hanif (2018) state that a rule of thumb is that an oligopoly exists w ...
... According to Gonzalez et al. (2019), if the four largest companies control at least 40% of the sales market share of the industry concerned, the industrial structure is categorised as an oligopoly. But Khan and Hanif (2018) state that a rule of thumb is that an oligopoly exists when the top five firms in the market account for more than 60% of total market sales (Appendix A.1). ...
This study aims to analyse the market structure, conduct, and performance of the star hotel industry in North Sumatra. The study was conducted in 2019 with time series data for the period of 2013 to 2018. The market structure is measured using the methods of concentration ratio, Herfindahl-Hirschman index, and barriers to entry, while descriptive methods are used to analyse the conduct and performance of five-star hotels. The results of the study show that: (i) there is a concentration of three- and four-star hotels, and that the concentration of four- and five-star hotels have an oligopolistic structure; (ii) the market structure of star hotels tends to be monopolistic; (iii) the minimum efficient scale index of star hotels is relatively small, which means that new hotels have a good opportunity to get a larger market share; (iv) the level of service and the level of availability of star hotel facilities are classified as good; and (v) the star hotel market structure influences hotel business behaviour in North Sumatra, which in turn affects hotel business performance.
... Belum adanya konsensus diantaranya terkait dengan pemilihan variabel kinerja (H. Khan & Hanif, 2018) dan metode yang digunakan dalam melihat hubungan tersebut (H. H. . ...
... Hal ini karena bank-bank tersebut nyaman dengan kondisinya (quiet life) sehingga tidak efisien dalam pengelolaannya. Khan & Hanif (2018) mengamati adanya SCP di Pakistan. Hasil penelitiannya adalah efficient structure hypothesis terjadi di negara tersebut. ...
... Model penelitian yang digunakan mengacu pada Khan & Hanif (2018). Dimana model yang digunakan juga mengikuti model dari Alhassan (2015). ...
The aim of this study is to find the relationship between
market structure and performance of banking industry in
Indonesia. Structure Conduct Performance Hypothesis and
Relative Market Power Hypothesis are few of hypotheses
among others that try to conclude relationship between
those variables. This research use commercial banks that
operate and alredy give their financial report to Financial
Service Authority (FSA) in 2018 as a sample. This study
shows that Relative Market Power Hypothesis in Indonesian
banking. It means that policies that support bank merger or
acquisition is not suitable for Indonesia. Since banks gain
their profit by offering diversified product.
... Literature on measuring competition has also been evolving along with developments in the banking sector around the globe as well as in Pakistan. It started exploring banking sector competition on the lines of industrial organization using 'structure-conduct-performance' and 'efficient structure' paradigms as we discussed in Khan and Hanif (2017a). The deficiencies in the structural measures of competition encouraged the use of formal tests, like Panzar-Rose (1987) H-statistic (as we used in Khan and Hanif, 2017b) to assess the underlying competitive environment of the banking sector. ...
... Given the substantial changes as a result of financial sector reforms in Pakistan, there is need to study how competition has evolved over time in the country during the last two decades. In Khan andHanif (2017a and2017b), we have reviewed studies on competition in the banking sector of Pakistan including Arby (2003), Khan (2009), and Bhatti and Hussain (2010). None of these studies had used this new indicator of measuring competition in the banking sector of Pakistan. ...
... These issues are discussed at length inKhan and Hanif (2017a). ...
The banking sector of Pakistan has witnessed a notable transformation in its structure and business activities following the implementation of financial sector reforms since the early 1990s. Specifically, the reforms helped transform a repressed financial sector into a market oriented and sound financial sector, predominantly owned and managed by the private sector. How these developments have impacted competition among the banks is still an open question. This study attempts to answer this question with the application of a recent approach to measure competition: Boone indicator of competitiveness. This measure postulates that ineffi�cient firms (banks) in a competitive environment are punished harshly, and there is an output reallocation from inefficient to efficient firms/banks. We have estimated elasticity of market share to marginal costs for 24 banks in Pakistan, using a balanced panel of bank level (annu�al) data for the year 1996 to 2015. Marginal costs are obtained indirectly by first estimating a translog cost function using earning assets as an output, and cost of financial capital, physical capital and labor as inputs. The estimated Boone Indicator value of negative 0.31 is signifi�cant and suggests that inefficient banks have been losing their market share to efficient banks
over the estimation period: a reflection of underlying competitive environment. Increasing value of Boone indicator (in absolute terms) over the period of study suggests that competition among the banks in Pakistan has increased over time.
... Market power theory, marketability and profitability Banking sectors in emerging and developing markets are characterized by higher market power (Mirzaei and Moore, 2014). As given by the studies of Jeon and Miller (2005) as well as Khan and Hanif (2019), there are two things that can be explained through market power theory, that is structure-conduct-performance (SCP) and relative market power. SCP describes market concentration and market share. ...
... According to the studies of Jeon and Miller (2005) as well as Khan and Hanif (2019), in describing market power implied by Berger (1995), market power can be explained through SCP describing market concentration and market share. At the point of the literature, market power theory plays a relevant role in explaining marketability. ...
Purpose
The purpose of this paper is to analyze marketability constructed from market share and concentration and to test its effect on the profitability and the mediation effects of profit‒loss sharing under stewardship theory.
Design/methodology/approach
This research employs data of financial statements published by ten sharia commercial banks listed in the Indonesia Financial Services Authority during the period 2011–2016. The data are analyzed into path analysis model using multiple mediators.
Findings
The result reveals that sharia banks’ marketability in Indonesia tends to be low. Based on the test of significance through Partial Least Square, it is found that marketability has a positive effect on the level of profitability, indicating that market share and concentration of sharia banks positively lead the change on the level of Return on Asset and Return on Equity. This paper further identifies the mediation effects emerged through mudharabah and musharakah. The results point out that mudharabah has a partial effect and musharakah has a competitive effect on the relationship between market share and profitability.
Practical implications
This paper can be a decision-maker for Central Bank and Financial Services Authority for encouraging sharia banks to enhance the power market through the mode of finances with profit‒loss sharing.
Originality/value
The growth of sharia banks is currently becoming highlight of the literature of sharia banks. This paper provides insights into stewardship theory that sharia banking management provides the concept of the alignment of interest.
... It argues that market structure directly determines the conduct of market actors, which in turn influences market performance. Over the years, the SCP has been used to study a variety of topics such as banking [35], sustainable infrastructure [36], strategic management [37], as well as supply chain and firm performance [38]. Recently, Peng and Poudineh [39] extended the SCP framework by introducing the role of regulatory frameworks in energy market design, forming the structure-conduct-performance regulation (SCPR) paradigm. ...
Tackling climate change requires a rapid transition to renewable energy (RE). However, resource rents and subsidies present multiple challenges to the energy transition in fossil fuel-rich countries. Here, we analyze the complex but often overlooked constraints to utility-scale RE investment in Nigeria, combining qualitative data from 24 interviews with administrative data from public and private stakeholders. Using the Structure-Conduct-Performance-Regulation (SCPR) framework and the Rentier State Theory (RST), we identify three mutually reinforcing constraints related to stakeholder distrust, a monopolistic wholesale market, and a protracted subsidy regime that impede utility-scale RE investment in Nigeria. Bold policy reforms are needed to promote competition , attract investment, improve the efficiency of the market, and meet the country's clean energy goals.
... Meanwhile, Ye et al. (2012) used the same method as Berger (1995) with the addition of the relationship between market power and efficiency to avoid endogeneity problems of the relationship between market power and profitability. Khan and Hanif (2019) specifically studied the SCP hypothesis examining the validity of the SCP hypothesis in ASEAN. The results show the SCP hypothesis in the ASEAN region, which means that higher profits in the banking industry are concentrated partly due to anti-competitive behavior by banks. ...
Purpose – This paper aims to investigate whether the Islamic banking industry in Indonesia and Malaysia is collusive or efficient. Indonesian Islamic banking is expected to meet the Qualified ASEAN Bank (QAB) to compete with other Islamic banks, including Malaysia.Methodology – The data used in this study was panel data on Islamic banking in Indonesia and Malaysia from January 2010 to December 2019. Data analysis employed static panel data regression.Findings – The findings of the study disclosed no collusive behavior from Islamic banking in Indonesia and Malaysia to increase profitability. Meanwhile, market share has been shown to boost profitability in terms of equity, despite the fact that there is an endogeneity problem. Technical efficiency and scale efficiency in Islamic banking in Indonesia have been shown to significantly increase market share, but not profitability and market power. This study concludes that if Islamic banking market in Indonesia and Malaysia are opened and state boundaries are lifted, Indonesian Islamic banking still will not be able to compete since it has not been able to acquire economies of scale.Implications – Islamic banking in Indonedia needs to establish Islamic-Finance-Friendly Regulations. It is expected to pave the way for the value-added character of Islamic banking, it is the most important strategy to boost market share of Indonesian Islamic banking.Originality – This study seeks to fill the validation gap of endogeneity test in Islamic banking. There is the limitation on studies of Islamic banks since the validation of endogeneity test deal only with conventional banking studies.
... J. Financial Stud. 2023, 11, 44 2 of 21 to collude and to protect their market position with strategic behavior (Khan and Hanif 2019). Therefore, competition is particularly important in the banking sector because it affects the performance of practices. ...
The aim of this paper is to provide empirical evidence about the effect of organizational competition (OC) as a contextual factor on the relationship between the effectiveness of information technology governance (ITG), which informs accounting information systems, and the financial performance of banks. Financial performance is identified by return on investment (ROI), return on equity (ROE), and Tobin’s Q. Averages of these variables were calculated for five years from 2015 to 2019. In fact, there is evidence for the general argument that banks will improve their performance by implementing ITG. Specifically speaking, the basic idea presented in this study is that the relation between ITG and bank performance depends on the appropriate interaction and matching between ITG and the OC. The study population includes the senior managers of banks in Jordan. Accordingly, a questionnaire consisting of 16 paragraphs was developed and distributed to senior managers in 23 banks during January to May 2021. As a result, 142 valid questionnaires were collected, which represented 61.7% of the questionnaires expected to be collected. Data are analyzed and processed by using descriptive statistical measures, t-test, exploratory factor analysis, along with multiple regression. The results show that despite the significant effect of OC on ITG, no relation exists between the interaction of ITG and OC, and bank performance in the three proxies of performance. The results of the study suggest that either banks do not benefit from ITG to improve their performance or that the chief executive officers’ perceptions about ITG in their banks is erroneous. However, it should be clarified that the respondents could have been affected by their values and beliefs when evaluating effective ITG use in their banks.
... Scholars have developed SCP as a rational approach in the existing literature. Structure conduct performance (SCP) is a term used by Jeon and Miller (2005) and Khan and Hanif (2019) to describe market concentration and market share. Market share is calculated by dividing total assets in individual sharia banks by total assets in all sharia banks. ...
This paper examines the impact of banking risk and competition on the performance of Islamic banks in Indonesia. The study used financing to deposit ratio (FDR) as a representation of liquidity risk, non-performing financing (NPF) as a representation of financing risk, and the operating expense ratio (BOPO) as a representation of operational risk. Regarding competition, market share (MS) and market concentration (MC) proxies by the Hirschman-Herfindahl Index (HHI) were used. Time series data were collected from 14 Islamic banks operating in Indonesia for the period 2010-2020 and the Least Square method was used. It was found that liquidity risk affects positively the profit of Islamic banks, while financing risk and operational risk impact negatively the variation of the profit. Only market share, influences the variation in the profit of Islamic banks in terms of competition level. Therefore, the Indonesian government should apply a competition policy to the Islamic banking sector in order to increase their profitability and improve economic growth. For future research, it is recommended to include other Islamic finance institutions like Islamic rural banks and Islamic takaful (Islamic insurance) to analyse these effects in a general way.
... Use of advanced technologies and improved services provide opportunity for banks to increase their market share (Amasyali et al., 2014). Market share has been associated with market power of firms and increase in bank performance (Khan and Hanif, 2019;Sahile et al., 2015). Past studies have reported a positive association between market share and bank profitability. ...
ABSTRACT Purpose: The aim of this study is to examine the effect of adopting neobanking on the market share of traditional banks in the UAE and test the influence of financial performance indicators on the banks' market share after the digital transformation. Theoretical framework: The financial service sector has been undergoing major transformation due to technological developments and innovations in terms of operating efficiency, client acquisition and organizational structure. Banks are accelerating digital transformation in an attempt to enhance digital presence, lower costs and gain market share. Neobanking is a recent innovation in the Fintech space that has disrupted the financial services sector. Design/methodology/approach: This study employs published data of quarterly financial statements from 2012-2021. Chow Test was applied, with known structural breaks in the data, based on the implementation of neobanking and our results are based on pooled regression. Findings: The results reveal that neobanking has influenced the bank specific factors and those factors have affected the market share. NPL, ROE and NIM are critical for the market share with each variable affecting all banks contrarily. This paper further identifies that NPL and NIM has a favourable impact on the market share of only one bank. Cost efficiency has no effect on the market share of the banks in the period after launching neobanking. Research, Practical & Social implications: The study has important implications for the management of banks as the results affirm that structural changes made to adopt digital transformation by firms is the key to derive the favorable effects in terms of increased revenue, profitability and lower credit risk. Originality/value: Neobanking is the most recent disruptor in the financial services sector and effect of digitalization in banking sector is becoming the focus of literature of commercial banks. This paper provides insights into bank specific variables that impact financial performance after its digital transformation.
... Use of advanced technologies and improved services provide opportunity for banks to increase their market share (Amasyali et al., 2014). Market share has been associated with market power of firms and increase in bank performance (Khan and Hanif, 2019;Sahile et al., 2015). Past studies have reported a positive association between market share and bank profitability. ...
Purpose: The aim of this study is to examine the effect of adopting neobanking on the market share of traditional banks in the UAE and test the influence of financial performance indicators on the banks’ market share after the digital transformation. Theoretical framework: The financial service sector has been undergoing major transformation due to technological developments and innovations in terms of operating efficiency, client acquisition and organizational structure. Banks are accelerating digital transformation in an attempt to enhance digital presence, lower costs and gain market share. Neobanking is a recent innovation in the Fintech space that has disrupted the financial services sector. Design/methodology/approach: This study employs published data of quarterly financial statements from 2012- 2021. Chow Test was applied, with known structural breaks in the data, based on the implementation of neobanking and our results are based on pooled regression. Findings: The results reveal that neobanking has influenced the bank specific factors and those factors have affected the market share. NPL, ROE and NIM are critical for the market share with each variable affecting all banks contrarily. This paper further identifies that NPL and NIM has a favourable impact on the market share of only one bank. Cost efficiency has no effect on the market share of the banks in the period after launching neobanking. Research, Practical & Social implications: The study has important implications for the management of banks as the results affirm that structural changes made to adopt digital transformation by firms is the key to derive the favorable effects in terms of increased revenue, profitability and lower credit risk. Originality/value: Neobanking is the most recent disruptor in the financial services sector and effect of digitalization in banking sector is becoming the focus of literature of commercial banks. This paper provides insights into bank specific variables that impact financial performance after its digital transformation.
... Concentration negatively affects the performance of MENA banks (Gonzalez, Razia, Bua, & Sestayo, 2019). Based on Khan and Hanif (2019) the banking sector in Pakistan support the ES paradigm with a weak association between market structure and bank performance. The efficiency and the competition level of banks in ASEAN-5 countries were found to be relatively high, and can be classified as monopolistic where each bank competes by diversifying their products or segments (Astuti & Saputra, 2019). ...
... Dalam konteks perbankan, peningkatan market share menghasilkan lebih tinggi profitabilitas bank, variabel total aset sebagai bank size yang dimasukkan untuk memperhitungkan perbedaan dalam perbankan kinerja dan dapat dianggap sebagai proksi untuk skala ekonomi (Ab-Rahim & Chiang, 2016). Dan aset sendiri sebagai ukuran dalam menghitung market share perbankan, aset perbankan dibandingkan dengan total aset industri perbankan di suatu Negara (Isik & Kabir Hassan, 2003;Chortareas et al., 2009;Mirzaei et al., 2013;Sahul Hamid, 2017;Azam, 2018;Khan & Hanif, 2018;Qayyum et al., 2018;González et al., 2019). Ibrahim (2019) mendokumentasikan bukti untuk kemampuan kekuatan modal dan mitigasi risiko kedua jenis bank (bank konvensional dan bank syariah). ...
p> Conducting analysis of efficiency, risk-taking behavior and market share of Islamic Banking in Indonesia. Conducted to answer the question of the still low market share of sharia banking in the national banking industry. The presence of Sharia Banking on dual banking system is still minimal. The monthly data sample of 34 Shariah Bank in Indonesia (11 Sharia Commercial Banks, 13 Sharia Business Units) is used to test the research hypothesis for the period from 2014 to 2017 using the estimator Generalized Method of Moments. The results show that there is a significant relationship and / or influence between the efficiency, risk-taking behavior and market share of Sharia Banking in Indonesia. Effect of moderation Efficiency and Risk-Taker Behavior on Financial Performance of Sharia Banking. Research limitations/ implications - Firstly, this paper focuses only on the sharia banking industry in Indonesia that adopts pro-active models, and therefore, expanding the investigation to include countries adopting different models may provide a better and more comprehensive view of the correlation between efficiency, risk-taking behavior and market share of Sharia Banking. Secondly, there is a need for more empirical data to be used, such as 7 years or more. This paper provides empirical evidence to regulators and policymakers in Indonesia, to understand how to increase the market share of sharia banking to the national banking industry. Furthermore, the sharia banking shareholder intends to increase the market share of sharia banking as one of the pillars of sharia finance in Indonesia which continues to grow. Previous studies have only discussed financial performance, efficiency and risk-taker behaviors without linking to market share levels. Because the discussion of market share is usually monopolized marketing studies.. </p
... These dynamics could be attributed to the increased concentration and recent wave of amalgamations in the industry commensurate with the too big to fail sentiment and can have profound implications 45 as it can potentially lead to collusive practices among others (Bos et al., 2013). These findings are in contrast to (Khan & Hanif, 2017a, 2017b, 2017c However, these studies fail to differentiate between loan and deposit market. Moreover, our findings are consistent with (Bikker et al., 2007;Claessens & Laeven, 2004;Khan & Riazuddin, 2009). ...
Banking regulators and supervisory authorities aim to develop and exercise prudent policies to mitigate the riskiness of financial sector to achieve a stable banking system. In the banking literature, the tradeoff between competition and stability has resulted in predominantly two opposing views; the traditional view of competition-fragility argues that increased competition in banking erodes market power, reduces profit margins and charter value, which in turn encourage banks to take excessive risks. In contrast, the competition-stability view suggests that, low competition in banking results in more market power which may encourage the banks to charge higher loan rates adversely affecting borrowers by risk shifting mechanisms, exacerbating moral hazard and adverse selection issues.
Given the opposing predictions of the literature, this study aims to test the two views, considering the effects of market power on the risk taking behavior of Pakistani banks along with the conditional effects of capital requirements, charter value and market discipline. Moreover, the literature has largely investigated the competition stability and or fragility nexus in deposit market only while ignoring the said nexus in loan market as a portfolio issue. We differentiate competition in deposit and loan markets for the first time in the case of Pakistan by estimating separate Lerner indices accordingly. In addition, we allow for possible non-linearities and explicitly test for charter value hypothesis, the risk shifting paradigm, the asset risk / leverage tradeoff effect and the capital buffer channels as potential channels for the risk effects of market power.
Using annual data for an unbalanced panel of 30 banks from 2006 to 2017, this study adopts dynamic panel data analysis techniques of two step system GMM. To control for endogeneity and for robustness, the GMM is further augmented with instrumental variables. Our findings suggest that, the competitive conditions in lending and deposit markets are substantially and significantly different in the case of Pakistan. The lending market is highly monopolistic whereas the deposit market is highly competitive. In addition, the relationship between competition and stability is largely nonlinear whereby risk shifting paradigm is dominant in the deposit market whereas the asset risk / leverage tradeoff effect is supported in lending market. We also find that the theoretical link between charter value and market power is sufficiently strong to restrain risky behavior of banks.
At policy level, our findings suggest that infusing further competition into the deposit market may become detrimental to stability while the same is necessary to improve the competitive conditions in lending market. Furthermore, our results suggest thoroughly encouraging charter value and capital requirements as these two are strongly restraining risky behavior of banks. In addition, banks’ risk, capital regulations, charter value and market discipline are largely interconnected and should be taken as such that these mostly reinforce each other in lending market while behaves otherwise in deposit market. Thus banking regulators and supervisory authorities should be cognizant of the implications of unilateral policies.
Key Words: Competition, Market Power, Charter Value, Market Discipline, Capital Adequacy, Bank Risk, Bank stability, GMM, Instrumental Variables, Stochastic Frontier Analysis, Translog Cost Function.
JEL Classification: G21, G32, L1
... Since 1970, commercial banks in Pakistan have dominated the financial system. However, these banks were unable to efficiently achieve their national socio-economic goals which lead to the nationalisation process in the bank sector of Pakistan (also see Khan and Hanif 2019). By the late 1990s, the public sector held almost 90 percent of the share in the banking industry and the multinational banks held the rest of the share since there were no domestic banks during that period. ...
This study aims to examine the effect of the bank-specific and macroeconomic determinants of profitability for the banking sector of Pakistan. To incorporate the issues of endogeneity, unobserved heterogeneity, and profit persistence, we apply a generalised method of moments (GMM) technique under the Arellano–Bond framework to a panel of Pakistani banks that covers the period 2003–2017. The results of a dynamic panel data approach reveal that capital adequacy accelerates the profitability of the banking sector in Pakistan. Capital adequacy helps the financial system to absorb any negative shock by reducing the number of bank failures and losses. Conversely, our empirical investigation reveals that the liquidity ratio, business mix indicators, interest rates, and industrial production deteriorates the bank profitability. Liquidity risks enhance the probability of default risks and transmit into the unpaid loans and hence the lower return. Our empirical evidence further reveals that Pakistani banks are not getting any benefit of the economies of scale in terms of financial performance.
... These dynamics could be attributed to the increased concentration and recent wave of amalgamations in the industry commensurate with the too big to fail sentiment and can have profound implications 4 as it can potentially lead to collusive practices among others (Bos et al., 2013). These findings are in contrast to (Khan & Hanif, 2017a, 2017b, 2017c who found perfect competition in the case of Pakistan utilizing various measures of competition. However, our findings are consistent with (Bikker et al., 2007;Claessens & Laeven, 2004;). ...
The relationship between competition and banking stability has resulted in two opposing paradigms; competition-fragility view suggests that increased competition erodes market power and encourages banks to take excessive risks. In contrast, the competition-stability view suggests that, low competition results in more market power which may encourage the banks to charge higher loan rates adversely affecting borrowers by risk shifting mechanisms. Given these opposing predictions in the literature, this study aims to test the two views, considering the effects of market power and capital requirements on the riskiness of Pakistani banks. Utilizing annual data for 30 banks over the period of 2004 to 2017, in a dynamic two step system GMM. We construct Lerner index as a direct measure of market power for the banking industry. Our findings support the competition stability paradigm in the case of Pakistan. We also find that the theoretical link between capitalization ratio and market power is sufficiently strong and should be encouraged as greater capital buffers reduce risk exposure.
... Marketability to profit and loss sharing has a calculated value of t 6.80506 > t table 1.645 and the original sample coefficient β1 -0.35806 < 0. This means that there is a significant negative influence of marketability on profit and loss sharing. Jeon and Miller (2005) and Khan and Hanif (2019) put forward the Theory of Structure Conduct Performance (SCP) which describes marketability, consisting of market concentration and market share. The theory of structure conduct performance explains that marketability is a factor that has a significant influence on banking performance and companies performing well are able to increase the share of profit and loss sharing. ...
Penelitian ini bertujuan untuk menganalisis efek langsung atau tidak langsung dari citra pendidikan tinggi pada motivasi, sikap dan pengambilan keputusan siswa. Data yang digunakan adalah sampel data mentah yang dikumpulkan dari 250 mahasiswa universitas swasta. Atribut yang diukur terlebih dahulu diperiksa dengan analisis faktor konfirmatori, dan kemudian model diverifikasi menggunakan model persamaan struktural (SEM) dan kemudian divalidasi untuk analisis. Hasil penelitian menunjukkan bahwa citra perguruan tinggi memiliki pengaruh positif dan signifikan terhadap motivasi dan sikap. Siswa memilih institusi pendidikan tinggi swasta di Sulawesi Selatan.
... We choose these two countries for comparison, not only because they are among the emerging Asian economies, but also because the two countries have undergone deep reforms in the banking industry since the 1990s to improve profitability and productivity. Specifically, the banking sector in China and Pakistan both went through from nationalization to internationalization with several great reforms [27,28]. However, the performance of banks is still not up to the standard in the two countries [26]. ...
The purpose of this study is to determine and compare the relationship between intellectual capital (IC) and banks’ performance in China and Pakistan. The data are acquired from listed banks in these two countries during 2010–2018. The Value Added Intellectual Coefficient (VAIC™) method is applied as a measure of IC. The results show that capital employed efficiency (CEE) makes the highest contribution to bank performance in both countries. In addition, the profitability of listed Chinese banks is driven by structural capital efficiency (SCE), while human capital efficiency (HCE) positively affects bank profitability and productivity in Pakistan. In addition, we find that the lagged effect of IC has a positive impact on future bank profitability. This study supports greater investment in IC in order to further improve bank performance in emerging Asian markets.
... These dynamics could be attributed to the increased concentration and recent wave of amalgamations in the industry commensurate with the too big to fail sentiment and can have profound implications 4 as it can potentially lead to collusive practices among others (Bos et al., 2013). These findings are in contrast to (Khan & Hanif, 2017a, 2017b, 2017c who found perfect competition in the case of Pakistan utilizing various measures of competition. However, our findings are consistent with (Bikker et al., 2007;Claessens & Laeven, 2004;Khan & Riazuddin, 2009). ...
The relationship between competition and banking stability has resulted in two opposing paradigms; competition-fragility view suggests that increased competition erodes market power and encourages banks to take excessive risks. In contrast, the competition-stability view suggests that, low competition results in more market power which may encourage the banks to charge higher loan rates adversely affecting borrowers by risk shifting mechanisms. Given these opposing predictions in the literature, this study aims to test the two views, considering the effects of market power and capital requirements on the riskiness of Pakistani banks. Utilizing annual data for 30 banks over the period of 2004 to 2017, in a dynamic two step system GMM. We construct Lerner index as a direct measure of market power for the banking industry. Our findings support the competition stability paradigm in the case of Pakistan. We also find that the theoretical link between capitalization ratio and market power is sufficiently strong and should be encouraged as greater capital buffers reduce risk exposure.
... In contrast, there are comparatively fewer studies which report negative impact of market concentration on profitability (Anderson et al., 2000;Alhassan et al., 2015;Mukhopadhyay and Chakraborty, 2017). Additionally, some studies do not find any statistically significant relationship between market concentration and profitability after controlling for other profitability determinants (Clarke, 1984;Khan and Hanif, 2018;Keil, 2018). ...
The impact of market concentration on profitability is a controversial question in industrial organization without a clear answer. The aim of the research is to investigate this prospective impact in the context of Serbian manufacturing industry. The main hypothesis of the research is that the increase in market concentration increases the profitability in the markets, due to the collusion of the dominant companies. We test this hypothesis by defining, estimating and testing the model describing the impact of structural and other control variables on market profitability by using secondary panel data for 122 markets, observed in 2015 and 2017. We obtained the data from 30 037 financial reports of the manufacturing industry companies. The model was estimated by using an error component two stage least squares estimator (EC2SLS). The results indicate a statistically significant positive impact of market concentration on profitability, empirically supporting the traditional market power hypothesis.
Purpose
This paper aims to examine the relationship between board structure and risk-taking, exploring how this association is influenced by advanced technologies in the banking sector.
Design/methodology/approach
This study uses a panel sample of 22 Pakistani banks from 2011 to 2018. To test the authors’ hypothesis, the authors use regression analysis with two-way cluster robust standard errors. Further, the authors also check the robustness of the authors’ findings using alternate proxies of board structure and bank risk-taking behavior. To address endogeneity concerns, the authors use the two-stage least square technique.
Findings
In the era of the Fourth Industrial Revolution, Pakistani banks’ digitalization is modeled by the presence of Temenos-T24/Oracle as their core banking system (software providing end-to-end operational integration). Its interactional effect with corporate governance is evaluated to implicate informed risk-taking by the board as a result of improved information access and analysis. The authors find that board size has a positive association with risk-taking, and the use of modern technology reshapes this association in the banking sector.
Originality/value
The contribution of this paper is twofold. First, the impact of board structure on bank risk-taking has not been extensively researched in Pakistan – a highly volatile and unpredictable economy. Second, the evaluation of the role of technology on bank risk is being researched for the very first time – a uniqueness of this paper.
Canadian military naval industry has historically suffered from cycles of high investment during periods of conflict and cuts in peacetime. After years of scrapping, the government turned to the sector through the initiative of the National Shipbuilding Strategy (2010), which is an ambitious attempt to modernize the navy. Taking this scenario into account, the main purpose of this paper is to understand the role of the State as a promoter of the interactions between the relevant actors and the rules of this industry. To do so, the analysis will be based on the Structure-Conduct-Performance (SCP) paradigm, allowing a better understanding of the dynamics of the industry and a clearer identification of its important variables. Setting up a case study, this research uses official data, documents, reports and academic papers. the time frame covers the period 2010-2018, due to the launch of the Canadian shipbuilding strategy, which is a milestone for the revitalization and operation of the Canadian naval industry. This policy changed the components of the country’s military naval industry.
Orientation: In Zimbabwe, mining is a significant economic sector but has adverse environmental impacts.
Purpose: This article assesses environmental responsibility practiced by gold mining companies differentiated by ownership structure and assesses the ownership system that leads in environmental, social and governance practices.
Motivation for the study: The adverse environmental impacts inherent in gold mining need assessments to gauge the integrity of the environmental stewardship using the structure–conduct–performance paradigm as an assessment framework.
Design, methodology, approach: The mode of assessment is to establish, through the structure–conduct–performance paradigm, whether these governance systems affect the companies’ environmental performance, and if so, to what extent. The article uses a multiple case study design with a population of 35 large-scale gold mining companies that are members of both the Chamber of Mines of Zimbabwe and the Mine Industry Pension Fund, and 23 participated. The article uses a mixed methods approach using a questionnaire and structured interviews to collect quantitative and qualitative data, respectively. The study employed Kruskal–Wallis rank test, to rank the differences in governance structures’ performances.
Findings: The results show that gold mining companies in Zimbabwe exercise environmental stewardship. Mining companies listed on foreign exchanges and local private limited companies exhibit more responsibility than other ownership types.
Practical implications: Government policy to compel soil restoration and overburden management can improve these practices.
Contribution/originality/value of the study: This study contributes to the burgeoning literature on corporate environmental responsibility by illuminating the possible role played by ownership structure in environmental responsibility.
This manuscript aims to examine how Financial Technologies (FinTech) influence the efficiency and market power of banks in India. This assessment is made based on a quantitative analysis of private and public banks from 2011 to 2019. The research uses the Data Envelopment Analysis (DEA) and panel regressions with pooled Ordinary Least Squares, Fixed Effects, and Random Effects. FinTech is represented by the volume of mobile banking transactions. The results show that FinTech has a significant negative relationship with market power proxied by the concentration of banks. FinTech also has a significant negative effect on technical efficiency. Market power and efficiency of banks are found to share a positive association. The research is limited by the narrow representation of FinTech and inferring about the market power based on the industry structure alone. Future studies are recommended to use alternative proxies and consider more disruptive and sustaining innovations to represent FinTech.
It is a global challenge to reduce environmental pollution and enhance sustainable economic growth. This study explores the role of financial development as an instrument in reducing environmental pollution and enhancing sustainable economic development in Pakistan for the period 1980-2020. The Non-linear Autoregressive Distributed Lag (NARDL) econometrics technique has been utilized to find the association between environmental pollution, economic growth, and financial development. The results show that positive shocks of financial development increase economic growth and reduce environmental pollution. While the negative shocks of financial development increase both economic growth and environmental pollution. Globalization has negative impact on economic growth and the use of energy increases economic growth and environmental pollution. The study suggests that the State Bank of Pakistan and other financial institutions should formulate and implement soft loan policies to induce the private investors to use low carbon emission technologies.
Purpose
This paper aims to investigate the impact of market structure and market share on the performance of the Islamic banks operating in the Iranian banking system based on the structure-conduct-performance (SCP) paradigm.
Design/methodology/approach
The Iranian Islamic banking system’s market structure is evaluated by using the econometrics method to test the validity of the traditional SCP paradigm. For this purpose, the authors estimate a simple regression model that is consisted of several independent variables, such as the market share, bank size, real gross domestic product, liquidity and Herfindahl-Hirschman index as a proxy variable for concentration and one dependent variable, namely, the profit as a proxy for performance. The panel data includes a data sample of 22 Islamic banks operating from 2006 to 2019. Data are extracted from the balance sheet of Islamic banks and the time-series database of the Central Bank of Iran and World Bank.
Findings
The study’s findings indicate that both concentration and market share have a positive impact on the performance of banks in the Iranian Islamic banking system. This result is contradicted with both traditional SCP and efficient structure hypotheses; however, it confirms the existence of oligopoly or cartel in the Iranian Islamic banking system that few banks try to gain the highest share of profit and maintain their market share by colluding with each other. This result is in contradiction with other research studies about the market structure in the Iranian banking system that claimed that banks in Iran operate under monopolistic competition. In addition, it shows that the privatization of some banks in Iran does not improve and help competition in the Iranian banking system.
Originality/value
This paper is a pioneer empirical study analyzing the market structure, concentration and collusion based on the SCP paradigm in Iranian Islamic banking. The results of the study support the existence of collusive behavior among the Islamic bank in Iran that is not aligned with Sharia. This study clearly shows the difference between ideal Islamic banking and Islamic banking in practice in Islamic countries. This clearly indicates that only prohibiting some operations like receiving interest, gambling and bearing excessive risk is not enough. In fact, the Islamic banking system should be based on the Sharia rule in all aspects and much more modification and study have to be done to achieve an appropriate Islamic banking system. These possible modifications to overcome the issues of cartel-like market structure and collusive behavior in the Iranian Islamic banking system include making the Iranian banking system more transparent, letting foreign banks enter the Iranian banking system and minimizing the government intervention in the Iranian banking system.
The scope of this article is an inter-industry study of the Swedish Wood Manufacturing Sector (WMS), examined from the perspective of the Structure-Conduct-Performance (SCP) paradigm in the theoretical field of Industrial Organization. The four research questions are: (1) identify the industries within the sector, (2) construct a contextually adapted SCP model and form the basis for hypotheses of relationships between the different variables in the model, (3) establish quantitative correlations between the variables, and finally (4) present a basically qualitative, explanatory interpretive analysis.
The empirical investigation is a total population study of 311 firms. Nine industries are identified, and an SCP model is presented including four explanatory variables – exposure to international competition, value-added scope, domestic demand growth potential and (domestic industry) seller concentration – and two performance variables – industry profitability (ROA) and industry growth.
The combined qualitative and quantitative explanatory analysis identifies some important relationships in the SCP model. The most prominent findings are the strong negative relationships between exposure to international competition and industry profitability and industry growth. Another finding is that strong positive relationships are found between the degree of value-added scope and industry profitability and industry growth.
Most people value work because of the material and psychological benefits that it offers. However, the workplace has become a source of both joy and in some situations sorrow in terms of ill health and in some cases fatalities. Nevertheless, the workplace is also a key place for safeguarding employees’ health through effective work organisation, management and design. Most developing countries are concerned with the effect of physical aspects of the work environment on workers’ health, safety and well-being whereas most developed countries are now focusing on emerging psychosocial risks. Psychosocial risks have been established as important antecedents of health especially in developed countries where information on them is abundant. However, despite this information, there is a dearth of knowledge on the nature and effects of psychosocial risks in developing countries. The ILO (2016) observed the limited prevalence data on psychosocial hazards and on work-related stress in developing countries. The rise of psychosocial risks has been associated with globalisation, which has brought about many changes in the world of work, including intense competition (Jain & Leka, 2019). The banking sector has not been spared from these changes and their effects and is the focus of this research. Moreover, psychosocial factors are associated with organisational costs in terms of absenteeism, poor performance, negative work attitudes and health costs. Psychosocial risks affect all workers despite their location. This is currently an understudied area in developing countries like Zimbabwe. Consequently, the overall objectives of this thesis were to first explore key stakeholder perspectives and their understanding of psychosocial risks and their relationship with individual and organisational health. Additionally, on the basis of the job demands-resources model, this research sought to explore the relationship between job demands (quantitative demands, emotional demands, work pace, work family conflict), and job resources (possibilities for development, social support from colleagues, social support from supervisors, quality of leadership, influence at work) with general well-being, job satisfaction, job performance, commitment to the workplace and work engagement. A mixed method design was adopted in this research. Thirteen semi-structured interviews were conducted with key stakeholders representing government, regulatory authorities, workers’ unions, employers’ organisations and relevant professions. A follow-up quantitative study comprised of an online survey that was administered to five banks in Zimbabwe. Thematic analysis results indicated that key stakeholders are generally aware of psychosocial risks and their effect on health but these are not prioritized due to other competing needs. There is no legislation pertaining to psychosocial risks and work-related stress although the Occupational Safety and Health policy of 2014 covers a few relevant aspects. Currently, there are no guidelines on implementation. Identified stressors included targets, long working hours and none or late payment of salaries. Barriers included lack of occupational health and safety funding, psychosocial risk prioritization and perception, cultural aspects and lack of research. Opportunities included supportive structures, knowledge of psychosocial issues and current interventions in place to manage safety and health. The priorities for action included training on psychosocial risks and inclusion of risk assessment principles in managing occupational safety and health. Multiple regression analysis results indicated that job demands were negatively associated with general well-being and other organisational health criteria whilst job resources had positive relationships with the same. Interestingly, only work pace had a positive relationship with job performance, work engagement and good general-well-being. Finally, interaction results indicated that some specific job resources moderate the relationship of specific job demands on organisational outcomes. Furthermore, the findings suggest that certain job demands weakened the relationship between specific job resources and organisational outcomes. This research has provided empirical support for the job demands-resources theory in an African country. Developing countries are encouraged to develop comprehensive policies in their efforts to manage occupational health. Workers are exposed to chemical, physical and psychosocial risks, therefore legislation, policies and guidelines should reflect this in a more comprehensive manner. This also implies that occupational safety and health inspections should cover all hazards as much as possible. The level of awareness and knowledge should be scaled up on the nature of psychosocial risks, their effects and how to prevent, monitor and manage them. There is also need to identify the specific job demands that need to be reduced, those that are impossible to reduce but should be monitored and complemented by high job resources, and the specific job resources that need to be availed in each situation according to the work context. The research indicated that workers’ well-being is influenced negatively by different types of demands at work, which calls for serious preventative actions from all stakeholders.
The market structure-performance relationship has been tested for US banking in industrial organization studies. Two divergent hypotheses with regard to this relationship are the Structure-Conduct-Performance (SCP) Paradigm and Efficient Structure Hypothesis (ESH). This paper presents the test results of both hypotheses with respect to the New York State S&L associations using the time-series and cross sectional (firm-level) data for the most recent period 2000-2010. The results of PEGLS regression indicate that performances of S&Ls vary with respect to operating cost, credit risk and capitalization. Neither market share nor concentration, however, plays a significant role in explaining profitability. The results partially support the ESH as an explanation for the market behavior of New York State S&L associatons. Given that profitable banks are efficient but also risk dependent, additional policies are warranted in order to mitigate risk and maintain the safety and soundness for the remaining S&Ls in the New York State.
This study reflects a historical background of Pakistani banking sector since its independence on August 14, 1947 from British rule. It indicates the journey of Pakistani banking sector from the establishment of SBP on July 1, 1948 as central bank. During 1950s and 1960s banking sector got expansion due to development projects. In 1974, banks operating in Pakistan got nationalized and came under the direct control of the Govt. of Pakistan. The Govt. of Pakistan is required to eliminate interest based transactions from the country according to its constitutions (i.e.1956, 1962 and 1973). In 1992, Govt. started privatization process of the financial sector especially banking sector. However, the inception of 21 st century came with Islamic banking practices across the globe to facilitate the different segments of the economy. Islamic banking practices in Pakistan proved a successful experience due to growth and expansion of the banking sector. This study reflects a picture of Pakistani banking sector since its creation. It enables the readers, academician and bankers to have a look about banking developments in Pakistan.
This paper rigorously investigates the determinants of bank competition for 146 countries over the sample period 1999-2011. The results employing both the Lerner index and the Boone indicator, reveal the distinctive characteristics of the competition drivers across different income groups of countries. Amongst other things, a concentrated banking system jeopardises competitiveness in developing economies, however, such a causal nexus is absent for advanced and emerging economies. Contestability and institutional development seem to boost competition in less-developed banking systems, whereas inter-industry competition and financial freedom are beneficial to advanced banking systems. These findings survive robustness tests.
This article evaluates the performance of the Arab Gulf Cooperation Council (GCC) banking industry in the context of the Structure-Conduct-Performance (SCP) hypothesis in the period 1993 to 2002. This article uses panel estimation differentiating between bank fixed effects and country fixed effects. It examines the Relative-Market-Power (RMP) and the Efficient-Structure (ES) hypotheses differentiating between the two by employing a nonparametric measure of technical efficiency, and finds that the banking industry in the Arab GCC countries is best explained by the mainstream SCP hypothesis. The empirical results do not find any support for the Hicks' (1935) 'Quiet Life' (QL) version of the market power hypothesis.
The purpose of this research is to examine the relationship between market structure and performance in thebanking sector using data from Pakistani commercial banks. Investigating the effect of changes in the marketstructure on profitability is based on the structure-conduct-performance (SCP) and efficient-structure (E-S)hypotheses. We have taken a sample of 20 scheduled commercial banks incorporated in Pakistan to examine theabove hypotheses, using the annual and pooled data for a period of 9 years from year 1996-2004. Threemeasures of bank’s performance are utilized: return on assets (ROA), return on capital (ROC) and return onequity (ROE). We have used concentration ratio (CR) to measure structure-conduct-performance (SCP)hypothesis and market share to measure efficient-structure (E-S) hypothesis. We have also used control variablesto capture market specific characteristics such as bank size, market size, risk to owners, liquidity measure,market risk, and market growth. Using regression analysis, we have found a positive relationship ofconcentration ratio (CR) with profitability. In light of these results, we conclude that there is a positiverelationship between profitability and concentration.The results of market share (MS) which is used for efficient structure (E-S) hypothesis explain a negativerelationship with profitability. The results of our analysis do not support the efficient structure (E-S) hypothesis.The empirical findings suggest that market concentration determines the profitability in Pakistani commercialbanks. Hence, we also conclude that there is a negative relationship between competition and profitability in thePakistani commercial banks. The leading banks are still enjoying the state of monopoly. But, the market trendshows that this state will not continue for a longer period as private commercial banks have started to competewith the existing top commercial banks.
The process of financial sector restructuring started in Pakistan during early 1990s. For this purpose, international financial institutions, like World Bank and ADB, provided technical and financial resources. The objective of this exercise was to let financial system play its role in economic growth and development of the country in an efficient and competitive way. A lot of policy decisions have been made and implemented during the last decade to reduce distortions and to develop competitive price mechanism in the financial markets. The process of restructuring is still going on and it is a bit earlier to say some final words about its success, however, we are able to say, on the basis of the trend the financial and other indicators are following, that we have been partially successful in achieving the set objectives. The competition among financial institutions has been intensified during the restructuring period. Some positive developments have also been witnessed on the front of money and foreign exchange markets. Though there are some improvements, yet there is a lot to do for strengthening of insurance sector, capital market and bond market. The whole exercise remained less effective in increasing financial deepening, and in reducing intermediation cost (i.e., interest rate spread). Until end of 1990s, policy of privatization of NCBs and drive for recovery of NPLs could not be pursued vigorously and NPLs continued to grow. During the last three years some considerable efforts have been made for privatization of NCBs. Only recently, the size of the NPLs has started to stabilize due to some intensified recovery efforts and better quality of new loans. The size of the NPLs is primarily responsible for the deteriorated health of financial institutions. The overall macroeconomic outcome is also against the expectations. Macroeconomic stability as well as proper sequencing of restructuring measures are necessary preconditions to the success of the whole exercise. In Pakistan, the financial restructuring process was introduced in an environment of large budget deficit and high and variable inflation i.e., in an atmosphere of macro-economic instability. Frequent changes in political set up of the country during 1990s also adversely affected this process. However, in the present milieu of political and economic management, it is expected that financial sector will be able to play its due role in economic growth and efficiency as the governance structure is improving, consistency in economic policies is being ensured, and political stability is envisaged.
The relationship between market structure and performance has been studied extensively for American banking. In contrast, little work has been done to investigate this relationship for European banking. Two explanations of a positive correlation between profitability and concentration have been advanced, the traditional structure-performance hypothesis (SCP) and the efficient-structure hypothesis. Previous empirical tests of the alternative hypotheses have yielded mixed results but the tests were not robust because they did not incorporate measures of efficiency directly in the model. This study applies a stochastic cost frontier as proposed by Aigner et al. (1977) to derive measures of X-inefficiency and scale-inefficiency, under the assumption that the errors are distributed half-normal. We incorporate these measures of inefficiencies directly into the tests as proposed by Berger and Hannan (1993). We do not find a positive and significant relationship between concentration and profitability for a sample of banks across 11 European countries over a four year period, 1988–1991. However, we do find evidence to support one of the two versions of the efficient-structure hypothesis for banks located in countries with low concentration of banks. Since little support is found for either of the SCP hypotheses, a simple policy of strict limitations on cross-border acquisitions and growth is not warranted.
In this paper we propose a new test of the efficient structure (ES) hypothesis, which predicts that efficient firms come out ahead in competition and grow as a result. Our test has significant advantages over existing ones, because it is more direct, and can jointly test the so-called quiet-life hypothesis, which predicts that in a concentrated market firms do not minimize costs. We then apply this test to large banks in Japan. Consistent with the ES hypothesis, we find that more efficient banks become larger. We also find that market concentration reduces banks’ efficiency, which supports the quiet-life hypothesis. These findings imply that there is an intriguing growth–efficiency dynamic throughout banks’ life cycle, although our findings also suggest that the ES hypothesis dominates the quiet-life hypothesis in terms of economic impact.
We empirically investigate the effects of market structure on profitability and stability for 1929 banks in 40 emerging and advanced economies over 1999–2008 by incorporating the traditional structure-conduct-performance (SCP) and relative-market-power (RMP) hypotheses. We observe that a greater market share leads to higher bank profitability being biased toward the RMP hypothesis in advanced economies, yet neither of the hypotheses is supported for profitability in emerging economies. The SCP appears to exert a destabilising effect on advanced banks, suggesting that a more concentrated banking system may be vulnerable to financial instability, however, the RMP seems to perform a stabilising effect in both economies. Evidence also highlights that profitability and stability increase with an increased interest-margin revenues in a less competitive environment for emerging markets. Overall, these results suggest that although policy measures to promote competition may dampen economic rent, excessive implementation may have an undesired destabilising impact on banks.
This paper measures the degree of competition in the banking sector of Pakistan by using structural approach developed by Panzar and Rosse (PR) in context of market contestability. A reduced form revenue equation is estimated by using panel data of 26 banks. The sample period is from 1997 to 2007. Various tests on PR-H Statistics suggest that banking sector of Pakistan, as a whole, is consistent with a monopolistically competitive market structure. Failure to reject the null of long-run equilibrium of the banking sector, a key assumption of PR-H Statistic, lends more credence to the finding of underlying degree of competition.
The paper uses annual and pooled data on Australian banks for the years 1994 to 1996 to test the two competing hypotheses of market structure and performance; namely, the structure-conduct-performance hypothesis (in concentrated markets firms derive higher profits due to collusion) and the efficiency hypothesis (firms derive higher profits because they are efficient). We test these two and other two intervening hypothesis in the context of the Australian banking market. The results reject the efficiency hypothesis and also the two intermediate hypotheses but there is a lack of strong evidence to reject the structure-conduct-performance hypothesis. The results are important because such an empirical investigation has not been conducted in Australia to date. The results suggest that it may be hard to defend abolishing the Four-pillar Policy (which was a major recommendation of Wallis Report 1997) on efficiency grounds.
Panel data models have become increasingly popular among applied researchers due to their heightened capacity for capturing the complexity of human behavior as compared to cross-sectional or time series data models. As a consequence, richer panel data sets also have become increasingly available. This 2003 second edition is a substantial revision of the highly successful first edition of 1986. Advances in panel data research are presented in a rigorous and accessible manner and are carefully integrated with the older material. The thorough discussion of theory and the judicious use of empirical examples make this book useful to graduate students and advanced researchers in economics, business, sociology, political science, etc. Other specific revisions include the introduction of the notion of strict exogeneity with estimators presented in a generalized method of moments framework, the notion of incidental parameters, more intuitive explanations of pairwise trimming, and discussion of sample selection dynamic panel models.
No one has the right, and few the ability, to lure economists into reading another article on oligopoly theory without some advance indication of its alleged contribution The present paper accepts the hypothesis that oligopolists wish to collude to maximize joint profits It seeks to reconcile this wish with facts, such as that collusion is impossible for many firms and collusion is much more effective in some circumstances than in others The reconciliation is found in the problem of policing a collusive agreement, which proves to be a problem in the theory of information A considerable number of implications of the theory are discussed, and a modest amount of empirical evidence is presented
This paper identifies the major determinants of profitability in the Korean banking sector for the period of 1992–2002 by testing the market structure hypothesis against the efficient structure hypothesis. The unique feature of this paper is the estimation of technical inefficiency by the directional distance function and the use of this estimate in explaining bank performance. The results indicate that bank efficiency has a significant effect on bank profitability and support the efficient structure hypothesis. We also find that the major determinants of bank profitability in Korea changed between pre- and post-Asian financial crisis periods.
With regard to the market structure and performance in Bangladesh banking industry, there are two competing hypotheses—the traditional structure–conduct–performance (SCP) hypothesis and the efficiency hypothesis (EH). Using pooled and annual data for the period 1999–2002, this study tests the validity of these two hypotheses. In general, the results of this study support the EH hypothesis as an explanation for market performances in Bangladesh, but for definitive policy purposes, the impact of the banking structure needs to be explored further.
The object of this article is to propose a new conception of the structure-conductperformance/ efficient structure relationship. Alongside standard hypotheses, we retain two intermediary hypotheses, named modified efficient structure hypothesis and hybrid efficiency/collusion hypothesis. The models are estimated using a random effects estimating procedure over a sample of Tunisian commercial banks during the period 1990-2005. The results about the variable efficiency cannot reject the efficient structure hypothesis. Besides, the results do not show any support in favour of the classic SCP hypothesis and intermediary hypotheses. This suggests that during the period under consideration, the Tunisian banks adopt a sufficient competitive behaviour and that they generate their performance not through market power exercise, rather through an efficient activity
Commercial banks undertake business of risk in an environment of asymmetric information. This is why, the industrial economists who are interested in theory of incomplete information and principal-agent framework have found the banking industry a promising field of research. There are number of studies on the behavior of commercial banks in various countries under structure-conduct-performance paradigm of industrial economics. However, there is hardly one in the context of Pakistan. This study attempted to analyze the structure and performance of commercial banks in Pakistan under the framework of industrial organization.
We construct a model where firms compete in both political and economic markets. In political markets, firms compete for influence over government transfer policy (rents). This activity can be beneficial for the firm, but is purely wasteful from the point of view of society because resources are utilized to achieve a redistribution of income. In the economic market, firms compete for market share through cost reducing technological innovation. Market structure plays an important role in this economy because competition drives firms to invest more in innovation resulting in higher growth. Rent-seeking affects economic growth in two important ways. It diverts resources away from innovation and it affects the number of firms that are supported in equilibrium. The former has a negative effect on growth while the latter effect is ambiguous, depending on whether rent seeking induces entry or exit. This market structure effect depends on a combination of political and economic factors that the theory highlights.
This paper calculates indices of central bank autonomy (CBA) for 163 central banks as of end-2003, and comparable indices for a subgroup of 68 central banks as of the end of the 1980s. The results confirm strong improvements in both economic and political CBA over the past couple of decades, although more progress is needed to boost political autonomy of the central banks in emerging market and developing countries. Our analysis confirms that greater CBA has on average helped to maintain low inflation levels. The paper identifies four broad principles of CBA that have been shared by the majority of countries. Significant differences exist in the area of banking supervision where many central banks have retained a key role. Finally, we discuss the sequencing of reforms to separate the conduct of monetary and fiscal policies. IMF Staff Papers (2009) 56, 263–296. doi:10.1057/imfsp.2008.25; published online 23 September 2008
This paper investigates the impact of international migration on technical efficiency, resource allocation and income from agricultural production of family farming in Albania. The results suggest that migration is used by rural households as a pathway out of agriculture: migration is negatively associated with both labour and non-labour input allocation in agriculture, while no significant differences can be detected in terms of farm technical efficiency or agricultural income. Whether the rapid demographic changes in rural areas triggered by massive migration, possibly combined with propitious land and rural development policies, will ultimately produce the conditions for a more viable, high-return agriculture attracting larger investments remains to be seen.
Performance-Structure and Market Power versus Efficiency in Latin American Banking.” Working Papers, Presented in conference in Department of Accounting
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