Reevaluation of the structure-conduct-performance paradigm in banking

Evanoff, Douglas D.; Fortier, Diana

doi:10.1007/bf00114854

Cited by 159 publications

(111 citation statements)

References 23 publications

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“…The results also suggest that concentration in the Pakistani Banking market lowers the cost of collusion between firms. Our findings are consistent with most recent studies that have tested the market structure in their evaluation of bank performance (Evanoff and Fortier 1988;Molyneux and Thornton, 1992;Lloyd-Williams et al, 1994;Molyneux and Forbes, 1995;E. W. Chirwa, 2003;Milind Sathye, 2005).…”

Section: Resultssupporting

confidence: 92%

Evidence on Structure Conduct Performance Hypothesis in Pakistani Commercial Banks

Bhatti¹,

Hussain²

2010

IJBM

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The purpose of this research is to examine the relationship between market structure and performance in the banking sector using data from Pakistani commercial banks. Investigating the effect of changes in the market structure 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 the above hypotheses, using the annual and pooled data for a period of 9 years from year 1996-2004. Three measures of bank's performance are utilized: return on assets (ROA), return on capital (ROC) and return on equity (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 variables to 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 of concentration ratio (CR) with profitability. In light of these results, we conclude that there is a positive relationship between profitability and concentration.The results of market share (MS) which is used for efficient structure (E-S) hypothesis explain a negative relationship 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 commercial banks. Hence, we also conclude that there is a negative relationship between competition and profitability in the Pakistani commercial banks. The leading banks are still enjoying the state of monopoly. But, the market trend shows that this state will not continue for a longer period as private commercial banks have started to compete with the existing top commercial banks.

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Section: Resultssupporting

confidence: 92%

Evidence on Structure Conduct Performance Hypothesis in Pakistani Commercial Banks

Bhatti¹,

Hussain²

2010

IJBM

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“…Smirlock (1985) favoured the efficiency hypothesis. Evanoff and Fortier (1988) used data of more than 6,300 US banks in 30 states in 1984. They examined the effect of regulation on bank performance by dividing the market into those with high entry barriers and those with low entry barriers.…”

Section: Measuring Performance Using the Structural Modelmentioning

confidence: 99%

Concentration and efficiency in the Vietnamese banking system between 1999 and 2009

Nguyen

Stewart

2013

Journal of Financial Regulation and Compliance

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“…Molyneux and Forbes (1995) emphasize that profitability measures, where all product profit and losses are consolidated into one figure, are generally viewed as more suitable because they bypass the problem of cross subsidisation. Evanoff and Fortier (1988) suggest a number of reasons why the ROA measure is preferable to other profit measures. Firstly, although some studies have used bank product prices as the dependent variable, banking is a multi-product business and individual prices may be misleading.…”

Section: Source: Annual Reportsmentioning

confidence: 99%

Market power versus efficient-structure in Arab GCC banking

Al‐Muharrami

Matthews

2009

Applied Financial Economics

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Reevaluation of the structure-conduct-performance paradigm in banking

Cited by 159 publications

References 23 publications

Evidence on Structure Conduct Performance Hypothesis in Pakistani Commercial Banks

Evidence on Structure Conduct Performance Hypothesis in Pakistani Commercial Banks

Concentration and efficiency in the Vietnamese banking system between 1999 and 2009

Market power versus efficient-structure in Arab GCC banking

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