Competition and competitiveness-drivers for economic growth and better performance of the financial sector

Abstract

Competition is important for proper functioning of all economic sectors, because it pressures the companies to be more innovative, efficient and effective. With the proper competition, the results show better performance and achievement of the desired outcome. Consequently, wellfunctioning companies are drivers for economic growth. However, competition in the financial sector is not as easy applicable as in the other economic sectors. High regulations can affect the flexibility and the innovative performance of the financial institutions. Nevertheless, the results of the effect of competition in the financial sector, with an emphasis on the banks, are mixed. Some theories show that competition has positive impact, contrary to some other findings that showed limited effects.