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Effect of Liberalization on Banking Competition

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  • Milo, Melanie S.
  • Pasadilla, Gloria

Abstract

The paper analyzes the impact of major policy changes on banking structure, performance and competition, using bank-specific data from 1990-2002. We find that the entry of more market players is correlated with drops in interest spread and profits which, partly, bespeaks of possible dissipation of previous monopoly profits of large commercial banks. We also compute the H-stat based on the Panzar-Rosse methodology and find that, in general, despite the characteristic presence of few, large commercial banks, the sector is fairly competitive, specially in the loan-granting business. Moreover, competition has increased in the latter half of 1990s, primarily due to the presence of more small commercial banks, rather than big banks.

Suggested Citation

  • Milo, Melanie S. & Pasadilla, Gloria, 2005. "Effect of Liberalization on Banking Competition," Discussion Papers DP 2005-03, Philippine Institute for Development Studies.
    • Handle: RePEc:phd:dpaper:dp_2005-03
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    References listed on IDEAS

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    Cited by:

    1. Khor, Niny & Jacildo, Ryan & Tacneng, Ruth, 2015. "Assessing Mandated Credit Programs: Case Study of the Magna Carta in the Philippines," ADB Economics Working Paper Series 463, Asian Development Bank.
    2. Luc Can & Mohamed Ariff, 2009. "Performance of East Asian banking sectors under IMF-supported programs," Journal of the Asia Pacific Economy, Taylor & Francis Journals, vol. 14(1), pages 5-26.
    3. K.C. Fung, 2007. "Service trade liberalization as a development opportunity - the role for the World Trade Organization," STUDIES IN TRADE AND INVESTMENT, in: Mia Mikic (ed.), FUTURE TRADE RESEARCH AREAS THAT MATTER TO DEVELOPING COUNTRY POLICYMAKERS, volume 61, chapter 3, pages 67-82, United Nations Economic and Social Commission for Asia and the Pacific (ESCAP).
    4. Ivana Blažková & Gabriela Chmelíková, 2016. "The Influence of Market Concentration on the Development of Newly Born Businesses in the Czech Republic," Acta Universitatis Agriculturae et Silviculturae Mendelianae Brunensis, Mendel University Press, vol. 64(3), pages 929-938.
    5. John K. Dadzie & Alessandra Ferrari, 2019. "Deregulation, efficiency and competition in developing banking markets: Do reforms really work? A case study for Ghana," Journal of Banking Regulation, Palgrave Macmillan, vol. 20(4), pages 328-340, December.

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    More about this item

    Keywords

    competition policy; banking reforms; bank liberalization; h-statistics; Panzar-Rosse methodology;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General

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