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Concentration and Competition in the Banking Sector of Turkey

Author

Listed:
  • Iveta Repková

    (Silesian university, School of Business Administration)

  • Daniel Stavárek

    (Silesian university, School of Business Administration)

Abstract

The paper estimates the competitive conditions and concentration in the Turkish banking industry during the period 2002-2010. The period starts after implementation of the comprehensive reform in the banking sector and lasts until culmination of the global financial crisis. The concentration ratio and the Herfindahl-Hirschman index are applied to measure level of concentration. We found the banking sector to be almost non-concentrated with exemption of deposit market where we revealed a slight concentration. However, there is a clear trend of increasing concentration at all segments of the Turkish banking sector over the analysed period. The Panzar-Rosse model is used for estimation of competitive conditions in the banking market. Specifically, we use a panel with data for most of the Turkish banks to estimate the H statistics. We concluded that the Turkish banking sector can be characterized as an industry with monopolistic competition that closely approaches monopoly. The results imply that banks in Turkey do not operate in a competitive environment and enjoy monopoly rents. Moreover, we revealed decreasing level of competition during the entire period of estimation. Such a market structure can pose a threat for efficient intermediation of funds through the banking sector and promoting of economic growth.

Suggested Citation

  • Iveta Repková & Daniel Stavárek, 2014. "Concentration and Competition in the Banking Sector of Turkey," The AMFITEATRU ECONOMIC journal, Academy of Economic Studies - Bucharest, Romania, vol. 16(36), pages 625-625, May.
    • Handle: RePEc:aes:amfeco:v:36:y:2014:i:16:p:625
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    References listed on IDEAS

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    Cited by:

    1. Tuncay Celik & Levent Citak, 2016. "Banking Competition, Financial Liberalization and Economic Growth: Evidence from Turkish Economy during the 1990-2014 Period," International Journal of Economics and Financial Issues, Econjournals, vol. 6(4), pages 1750-1755.

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    More about this item

    Keywords

    Turkish banking industry; concentration ratio; Herfindahl-Hirschman index; Panzar-Rosse model;
    All these keywords.

    JEL classification:

    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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