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Market power versus efficient-structure in Arab GCC banking

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  • Saeed Al-Muharrami
  • Kent Matthews

Abstract

This article evaluates the performance of the Arab Gulf Cooperation Council (GCC) banking industry in the context of the Structure-Conduct-Performance (SCP) hypothesis in the period 1993 to 2002. This article uses panel estimation differentiating between bank fixed effects and country fixed effects. It examines the Relative-Market-Power (RMP) and the Efficient-Structure (ES) hypotheses differentiating between the two by employing a nonparametric measure of technical efficiency, and finds that the banking industry in the Arab GCC countries is best explained by the mainstream SCP hypothesis. The empirical results do not find any support for the Hicks' (1935) 'Quiet Life' (QL) version of the market power hypothesis.

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Bibliographic Info

Article provided by Taylor & Francis Journals in its journal Applied Financial Economics.

Volume (Year): 19 (2009)
Issue (Month): 18 ()
Pages: 1487-1496

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Handle: RePEc:taf:apfiec:v:19:y:2009:i:18:p:1487-1496

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References

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  1. Douglas D. Evanoff & Diana L. Fortier, 1987. "Reevaluation of the structure-conduct-performance paradigm in banking," Staff Memoranda 87-9, Federal Reserve Bank of Chicago.
  2. R. D. Banker & A. Charnes & W. W. Cooper, 1984. "Some Models for Estimating Technical and Scale Inefficiencies in Data Envelopment Analysis," Management Science, INFORMS, vol. 30(9), pages 1078-1092, September.
  3. Demsetz, Harold, 1973. "Industry Structure, Market Rivalry, and Public Policy," Journal of Law and Economics, University of Chicago Press, vol. 16(1), pages 1-9, April.
  4. Berger, Allen N, 1995. "The Relationship between Capital and Earnings in Banking," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 27(2), pages 432-56, May.
  5. Goldberg, Lawrence G. & Rai, Anoop, 1996. "The structure-performance relationship for European banking," Journal of Banking & Finance, Elsevier, vol. 20(4), pages 745-771, May.
  6. Charnes, A. & Cooper, W. W. & Rhodes, E., 1978. "Measuring the efficiency of decision making units," European Journal of Operational Research, Elsevier, vol. 2(6), pages 429-444, November.
  7. Hannan, Timothy H., 1991. "Bank commercial loan markets and the role of market structure: evidence from surveys of commercial lending," Journal of Banking & Finance, Elsevier, vol. 15(1), pages 133-149, February.
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Cited by:
  1. Maghyereh, Aktham I. & Awartani, Basel, 2012. "Financial integration of GCC banking markets: A non-parametric bootstrap DEA estimation approach," Research in International Business and Finance, Elsevier, vol. 26(2), pages 181-195.
  2. Homma, Tetsushi & Tsutsui, Yoshiro & Uchida, Hirofumi, 2014. "Firm growth and efficiency in the banking industry: A new test of the efficient structure hypothesis," Journal of Banking & Finance, Elsevier, vol. 40(C), pages 143-153.
  3. Alin Marius Andrieş & Bogdan Căpraru, 2012. "Competition and efficiency in EU27 banking systems," Baltic Journal of Economics, Baltic International Centre for Economic Policy Studies, vol. 12(1), pages 41-60, July.
  4. Kondo, Kazumine, 2014. "Do Credit Associations Compete with Each Other in Japanese Regional Lending Markets?," MPRA Paper 56669, University Library of Munich, Germany.
  5. Matthews, Kent, 2010. "Banking Efficiency in Emerging Market Economies," Cardiff Economics Working Papers E2010/12, Cardiff University, Cardiff Business School, Economics Section.
  6. Setiawan, Maman & Emvalomatis, Grigorios & Oude Lansink, Alfons, 2012. "The relationship between technical efficiency and industrial concentration: Evidence from the Indonesian food and beverages industry," Journal of Asian Economics, Elsevier, vol. 23(4), pages 466-475.
  7. Kondo, Kazumine, 2014. "Cross-Prefecture Expansion of Regional Banks in Japan and Its Effects on Lending-Based Income," MPRA Paper 52978, University Library of Munich, Germany.

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