Market power and concentration-performance analysis of the banking sector: A comparative study of Singapore and Pakistan

Abstract

The study investigates the competitiveness of banking firms and its impact on Performance by testing the market power to efficient structure hypothesis. A comparative study conducted for Singapore and Pakistan, Period from 2005 to 2020, estimated Herfindahl Hirschman Index (HHI) and Market share as a proxy for efficient structure. Results indicated Singapore is a highly concentrated market, indicating a monopolistic competitive environment. However, Pakistan banking indicates a perfectly competitive environment. Study further; confirm the co-integration and long run relationship between variables through the Johansen co-integration and vector error correction (VECM) approach. The results specify the long run significant relationship between market power and competitiveness with banks profitability.

Keywords

• Concentration ratio
• Related market power (RMP)
• Structure Conduct performance (SCP) approach
• Herfindahl hirschman index (HHI)
• Johansen co-integration
• Vector error correction model (VECM