Financial Services Consolidation and Performance in New York State Savings and Loan Associations, 2000-2011

Abstract

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.

Empirical evaluation of ‘structure-conduct-performance’ and ‘efficient-structure’ paradigms in banking sector of Pakistan

“…In the next step, we expand the above functional form to take into account the measures of efficiency (EF), which would facilitate the test of ES hypothesis (Doyran, 2013). Mathematically, above functional form can be modified as below.…”