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Effect of Liberalization on Banking Competition

Author

Listed:
  • Gloria Pasadilla

    (PIDS)

  • Melanie Milo

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

  • Gloria Pasadilla & Melanie Milo, 2005. "Effect of Liberalization on Banking Competition," Development Economics Working Papers 22676, East Asian Bureau of Economic Research.
  • Handle: RePEc:eab:develo:22676
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    References listed on IDEAS

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    Citations

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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. 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).

    More about this item

    Keywords

    banking reform; bank liberalization; h-statistics; competition policy; Panzar- Rosse methodology;

    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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