New insight into market concentration and competition: Use of Barnett’s variable profit function to measure market structure in banking

2021 ◽  
pp. 1-12
Author(s):  
Fatima Hasan
Keyword(s):  
Market Structure ◽  
Financial Institutions ◽  
Economic Model ◽  
Market Concentration ◽  
Profit Function ◽  
Banking Markets ◽  
Insight Into ◽  
Underlying Variable

Previous research on market concentration in banking is heavily tilted towards using deposits as the underlying variable for measuring market concentration. This paper proposes a change in methodology by replacing deposits with the Variable profit function based on Barnett and Hahm’s Economic model for Financial Institutions, used in their 1994 paper. This model has also been successfully used in Dr. William A. Barnett’s successive research. Hancock 1997 also proposes using a similar methodology for modelling banks as Economic firms. Results change dramatically once deposits are substituted by variable profits, and a confounding puzzle is solved, involving one of South Asia’s thriving banking markets.

Market Structure and Bank Conduct in the MENA Region

2021 ◽  
Vol 0 (0) ◽  
Author(s):  
Ali Awdeh ◽  
Chawki El Moussawi ◽  
Hassan Hamadi
Keyword(s):  
Market Structure ◽  
North Africa ◽  
Gulf Cooperation Council ◽  
Market Concentration ◽  
Mena Region ◽  
Industrial Economics ◽  
Gcc Countries ◽  
Banking Markets ◽  
Pricing Power ◽  
Market Structure And Pricing

Abstract The Middle East North Africa (MENA) region is witnessing a wave of bank consolidations, with many mega-mergers taking place in the Gulf Cooperation Council (GCC) countries. These will result in creating large banks, reducing the number of market players and increasing market concentration; which is already high. A further increase in concentration may raise concerns about the resulting dominance of large banks and the consequences on their pricing behaviour. The interrelationships between market structure and pricing behaviour is summarised by the popular model of industrial economics called the structure–conduct–performance (SCP) model. Consequently, we test the prevalence of this model in a sample of 15 MENA banking sectors to detect the possible existence of an impact running particularly from the structure of banking markets to the pricing behaviour (power) of banks in order to predict a possible emergence of oligopolistic behaviour following bank consolidations. Using a two-stage least squares model, we found a positive and significant impact of market concentration on bank pricing, suggesting that an further increase in MENA banking markets’ concentration may boost banks pricing power and persuade them to increase their returns at the expense of their customers.

scholarly journals CUSTOMERS’ DEPOSIT BEHAVIOUR IN DUAL BANKING INDUSTRY: A MARKET STRUCTURE ANALYSIS

2020 ◽  
Vol 5 (1) ◽  
pp. 356-377
Author(s):  
Nafisah Mohammed ◽  
Azmafazilah Jauhari ◽  
Nadzirah Mohammed
Keyword(s):  
Market Structure ◽  
Structure Analysis ◽  
Concentration Ratio ◽  
Banking Industry ◽  
Market Concentration ◽  
Islamic Banking ◽  
Market Structure Analysis ◽  
Banking Markets ◽  
Conventional Banks ◽  
Structure Perception

Background and Purpose: The aim of this paper is to evaluate public acceptance toward Islamic banking system in Malaysia by using the market structure analysis as proposed in industrial organizational studies. The structural approach framework was used to evaluate the nature and changes of market concentration in the Malaysian Islamic and conventional deposit markets.   Methodology: The well-known market concentration measure, namely concentration ratio (CR) is calculated to study the changes in saving behaviour among depositors in both banking markets. The concentration ratios of deposits for both banking markets are evaluated by using the banking firms’ level data for the period 1997–2016. Pearson and Spearman correlation analysis was also used to investigate the relationship between the total deposits and bank-specific variables.   Findings: It is found that interest or profit rate paid to the depositors are the factor that greatly affect the depositors’ choice of banks to save their money. Besides, experience doing businesses is more important to Islamic banks compared to conventional banks in order to attract depositors.   Contributions: The findings demonstrate that societies, especially the Islamic community, are still loyal to conventional banks, which have more experience in the banking operation. The findings of this study are expected to open the eyes of the Muslim community to use Islamic banking services, which are certainly sharia-compliance.   Keywords: Concentration ratio, deposit, dual banking, market structure, perception.   Cite as: Mohammed, N., Jauhari, A., & Mohammed, N. (2020). Customers’ deposit behaviour in dual banking industry: A market structure analysis. Journal of Nusantara Studies, 5(1), 356-377. http://dx.doi.org/10.24200/jonus.vol5iss1pp356-377

Application of Statutes of Limitations to Islamic Banking: The Case of Malaysia

2020 ◽  
Vol 17 (1) ◽  
pp. 56-69
Author(s):  
Aishath Muneeza ◽  
Zakariya Mustapha
Keyword(s):  
Qualitative Research ◽  
Financial Institutions ◽  
Research Methodology ◽  
Islamic Law ◽  
Islamic Banking ◽  
Legal Action ◽  
Qualitative Research Methodology ◽  
The Right ◽  
Limitation Of Action ◽  
Insight Into

Limitations of action designate extent of time after an event, as set by statutes of limitations, within which legal action can be initiated by a party to a transaction. No event is actionable outside the designated time as same is rendered statute-barred. This study aims to provide an insight into application and significance of Limitations Act 1950 and Limitation Ordinance 1952 to Islamic banking matters in Malaysia as well as Shariah viewpoint on the issue of limitation of action. In conducting the study, a qualitative research methodology is employed where reported Islamic banking cases from 1983 to 2018 in Malaysia were reviewed and analysed to ascertain the application of those statutes of limitations to Islamic banking. Likewise, relevant provisions of the statutes as invoked in the cases were examined to determine possible legislative conflicts between the provisions and the rule of Islamic law in governing the right and limitation of action in Islamic banking cases under the law. The reviewed cases show the extent to which statutes of limitations were invoked in Malaysian courts in determining validity of Islamic banking matters. The limitation provisions so referred to are largely sections 6(1)(a) and 21(1) Limitations Act 1953 and section 19 Limitation Ordinance 1953, which do not conflict with Shariah viewpoint on the matter. This study will prove invaluable to financial institutions and their customers alike in promoting knowledge and creating awareness over actionable event in the course of their transactions.

scholarly journals Market concentration trends in South Africa’s private healthcare sector

2016 ◽  
Vol 19 (1) ◽  
pp. 53-63 ◽  
Author(s):  
Marine Erasmus ◽  
Nicola Theron
Keyword(s):  
Market Structure ◽  
Private Hospital ◽  
Market Concentration ◽  
Competitive Dynamics ◽  
Healthcare Sector ◽  
Private Hospitals ◽  
Hospital Market ◽  
Private Healthcare ◽  
Structure Changes ◽  
Relative Bargaining Power

The Competition Commission (CC) commenced with an enquiry into South Africa’s private healthcare sector at the beginning of 2014, the outcome of which could have far-reaching consequences for the medical industry in South Africa. The panel appointed to consider competition in the private healthcare sector has indicated that they are interested in understanding increased consolidation in the private hospital market and the effect this may have on competitive dynamics. This article considers historical concentration trends in the private hospital market from 2000 to 2012. In addition it also deals with changes in market structure in the medical scheme and administrator markets. These trends provide a complete picture of market structure changes and the implications for relative bargaining power of the various parties. It finds that whereas the market concentration of private hospitals has remained relatively stable since 2004, the market concentration of medical schemes and administrators has increased over this period.

Successful Cross-border Acquisitions of Latin American Financial Institutions: Identifying Success Factors

2012 ◽  
Vol 4 (3) ◽  
pp. 347-367 ◽  
Author(s):  
C. Bülent Aybar ◽  
Wendy M. Jeffus ◽  
John C. Edmunds
Keyword(s):  
Latin American ◽  
Financial Institutions ◽  
Success Factors ◽  
Market Access ◽  
Shareholder Wealth ◽  
Wealth Effects ◽  
Cross Sectional ◽  
Foreign Companies ◽  
Study Methodology ◽  
Insight Into

This article examines the shareholder wealth effects for foreign companies that announce acquisitions of financial institutions in Latin America. We examine data for 636 transactions for the period 1985–2009. We employ event study methodology coupled with a cross-sectional regression to determine if shareholders of the acquiring firm receive positive returns. The results indicate that acquirers receive positive returns when the acquisition involves a target bank in a market with low market access, high market risk, and greater control post acquisition. These findings offer improvements on previously examined variables and provide insight into a market not sufficiently examined in prior research.

scholarly journals Development of banking sectors in Kosovo and Montenegro in the years 2000-2010

2012 ◽  
Vol 3 (3) ◽  
pp. 79-101
Author(s):  
Katarzyna Kubiszewska
Keyword(s):  
Business Cycles ◽  
Market Economy ◽  
Financial Institutions ◽  
Central Banks ◽  
Recent History ◽  
Stages Of Development ◽  
Planned Economy ◽  
Banking Markets ◽  
Balkan Countries ◽  
The Future

The article presents main aspects of the development of banking markets in two Balkan countries – Kosovo and Montenegro. Both of them are charaterised by similar recent history, both in political and economical fields. Their financial sectors had to be built almost from scratch. The author describes the stages of development of competition in the banking sectors, using the following ratios: performace, structure, liquidity. The data is based on the information achieved from Kosovar and Montenegral central banks. Comparison of their achievements are presented on the pentagon adopted from macroeconomy stability pentagon, introduced in Poland by Institute for Market, Consumption and Business Cycles Research. The long way from centrally planned economy to market economy, in both countries, in both political and financial aspects has resulted in a successful transformation. The growing economic strength in Kosovo and Montenegro will allow their financial institutions to improve their performance and expand their activities in the future.

scholarly journals FRAMING THE SOCIAL RESPONSIBILITY ROLE OF ISLAMIC FINANCIAL INSTITUTIONS WITHIN A THREE-SECTOR ECONOMIC MODEL

2019 ◽  
Vol 7 (1) ◽  
pp. 180-188
Author(s):  
Mohd Nizam Barom
Keyword(s):  
Social Responsibility ◽  
Social Welfare ◽  
Financial Institutions ◽  
Economic Model ◽  
Third Sector ◽  
Welfare Provision ◽  
Integrative Framework ◽  
The Social ◽  
Islamic Financial Institutions

Purpose: This paper examines and reflects the ongoing debate on the social responsibility role of Islamic financial institutions (IFIs) in the light of the literature in the area of third sector and three-sector economic model. Subsequently, it seeks to develop a framework that can be used to conceptualise the potential interaction between the different sectors in the economy in relation to social welfare issues and locate the social responsibility role of IFIs within this framework.    Methodology: The paper uses an integrative analysis of Islamic finance and third sector literature, particularly on the American and European conceptions of the interactions between the three main sectors in the economy, i.e. public, private and ‘third’ sectors. Results: The paper develops a modified circular flow of income and expenditure model as a basis for the integrative framework for social welfare provision within a three-sector economic model. Subsequently, it locates the social responsibility role of IFIs within this framework with the understanding that social welfare burden is a collective responsibility and therefore shared among the various potential welfare providers in the economy.  Implications: The integrative framework of social welfare provision within a three-sector economic model as conceptualised in this paper highlights a multi-institutional approach towards promoting socio-economic justice and society's well-being in an Islamic economy, and hence provides a proper and reasonable context for social responsibility roles expected of IFIs.

Market structure-performance hypothesis in Kenyan banking industry

2015 ◽  
Vol 10 (4) ◽  
pp. 697-710 ◽  
Author(s):  
Solomon W. Giorgis Sahile ◽  
Daniel Kipkirong Tarus ◽  
Thomas Kimeli Cheruiyot
Keyword(s):  
Market Structure ◽  
Market Efficiency ◽  
Market Share ◽  
Commercial Banks ◽  
Banking Sector ◽  
Banking Industry ◽  
Developing Economies ◽  
Market Concentration ◽  
Bank Performance ◽  
Content Type

Purpose – The purpose of this paper is to test market structure-performance hypothesis in banking industry in Kenya. Specifically, the structure-conduct-performance (SCP) and market efficiency hypotheses were examined to determine how market concentration and efficiency affect bank performance in Kenya. Design/methodology/approach – The study used secondary data of 44 commercial banks operating from 2000 to 2009. Three proxies to measure bank performance were used while market concentration and market share were used as proxies for market structure. Market concentration was measured using two concentration measures; the concentration ratio of the four largest banks (CR4) and Herfindahl-Hirschman Index, while market share was used as a proxy for efficiency. The study made use of generalized least square regression method. Findings – The empirical results confirm that market efficiency hypothesis is a predictor of firm performance in the banking sector in Kenya and rejects the traditional SCP hypothesis. Thus, the results support the view that efficient banks maximize profitability. Practical implications – The study provides insights into the role of efficiency in enhancing profitability in commercial banks in Kenya. It has managerial implication that profitable banks ought to be efficient and dispels the notion of collusive behavior as a precursor for profitability. Originality/value – The paper fills an important gap in the extant literature by proving insights into what determines bank profitability in banking sector in Kenya. Although this area is rich in research, little work has been conducted in the developing economies and in particular no study in the knowledge has addressed this critical issue in Kenya.

Community Ergonomics: A Theoretical Model for Rebuilding the Inner City

1994 ◽  
Vol 38 (12) ◽  
pp. 724-728 ◽  
Author(s):  
Michael J. Smith ◽  
Pascale Carayon ◽  
John Smith ◽  
William Cohen ◽  
Jerry Upton
Keyword(s):  
Inner City ◽  
Financial Institutions ◽  
Effective Means ◽  
Business Community ◽  
Educational Systems ◽  
Religious Groups ◽  
Legal Requirements ◽  
Human Factors And Ergonomics ◽  
And Control ◽  
Insight Into

There is a critical need for various forces that are working to improve the inner city to coordinate their efforts and to develop cooperative approaches. This includes governments at all levels, social agencies, educational systems, the business community, financial institutions, religious groups, ethnic groups, police, universities and inner-city residents. The diversity in values, approaches, goals, desires and legal requirements makes such a systematic integration very complex and difficult. Several human factors and ergonomics theories for the management and control of complex systems can provide insight into effective means to address these issues. General principles can be established to promote “community ergonomics.”

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