Market Concentration and Bank Competition in Emerging Asian Countries

Abstract

This study aims to investigate both market concentration and bank competition of banking across six emerging Asian countries (e.g., Bangladesh, Indonesia, India, Philippines, Malaysia, and Vietnam) over pre and post the 2008 global financial crisis. The conduct parameter approach following the framework suggested by Uchida and Tsutsui (2005) is used to estimate bank competition in these countries. The study employs both seemingly unrelated regression (SUR) and three-stage least squares (3SLS) to estimate simultaneously the system of equations in our model. Generally we find a negative association between market concentration and bank competition across most of the countries in the study suggesting that banks in concentrated markets collude to generate higher profits. Monopolistic competition was the best description of competitive structure of banking across the majority of countries investigated by this study. The study fills the gap in the banking literature by investigating bank competition, concentration, and their relationship across emerging Asian economies over the 2008 global financial crisis. Moreover, several policy implications for banking industry are suggested.

Citation

Thi My Phan, H. and Daly, K. (2016), "Market Concentration and Bank Competition in Emerging Asian Countries", Boubaker, S., Buchanan, B. and Nguyen, D.K. (Ed.) Risk Management in Emerging Markets, Emerald Group Publishing Limited, Leeds, pp. 607-644. https://doi.org/10.1108/978-1-78635-452-520161031