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A framework for analyzing competition in the banking sector : an application to the case of Jordan

Author

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  • Demirguc-Kunt, Asli
  • Peria, Maria Soledad Martinez

Abstract

This paper proposes a framework to analyze competition in the banking sector using Jordan as an example. In particular, the paper pursues a multi-pronged approach to analyze competition including (i) an examination of the extent to which the market is contestable (that is, has low barriers to bank entry and exit), (b) an evaluation of the behavior of bank spreads, and (iii) an assessment of non-structural and direct measures of bank competition such as the H-statistic and the Lerner Index. This approach provides a more comprehensive framework to examine competition in the banking sector, compared with the commonly used alternative of looking only at bank concentration figures. In the case of Jordan, the analysis indicates that although concentration has declined, competition in the country is low and has decreased over time.

Suggested Citation

  • Demirguc-Kunt, Asli & Peria, Maria Soledad Martinez, 2010. "A framework for analyzing competition in the banking sector : an application to the case of Jordan," Policy Research Working Paper Series 5499, The World Bank.
  • Handle: RePEc:wbk:wbrwps:5499
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    References listed on IDEAS

    as
    1. Demirguc, Asli & Huizinga, Harry, 1999. "Determinants of Commercial Bank Interest Margins and Profitability: Some International Evidence," World Bank Economic Review, World Bank Group, vol. 13(2), pages 379-408, May.
    2. Yeyati, Eduardo Levy & Micco, Alejandro, 2007. "Concentration and foreign penetration in Latin American banking sectors: Impact on competition and risk," Journal of Banking & Finance, Elsevier, vol. 31(6), pages 1633-1647, June.
    3. Fernandez de Guevara, Juan & Maudos, Joaquin & Perez, Francisco, 2007. "Integration and competition in the European financial markets," Journal of International Money and Finance, Elsevier, vol. 26(1), pages 26-45, February.
    4. Juan Fernández de Guevara & Joaquín Maudos & Francisco Pérez, 2005. "Market Power in European Banking Sectors," Journal of Financial Services Research, Springer;Western Finance Association, vol. 27(2), pages 109-137, April.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Anginer, Deniz & Demirguc-Kunt, Asli & Zhu, Min, 2014. "How does competition affect bank systemic risk?," Journal of Financial Intermediation, Elsevier, vol. 23(1), pages 1-26.
    2. Chauvet, Lisa & Jacolin, Luc, 2017. "Financial Inclusion, Bank Concentration, and Firm Performance," World Development, Elsevier, vol. 97(C), pages 1-13.
    3. Radi Atoom & Eyad Malkawi & Basima Al Share, 2017. "Utilizing Australian Shareholders' Association (ASA): Fifteen Top Financial Ratios to Evaluate Jordanian Banks' Performance," Journal of Applied Finance & Banking, SCIENPRESS Ltd, vol. 7(1), pages 1-7.
    4. Radi Atoom & Eyad Malkawi & Basima Al Share, 0. "Utilizing Australian Shareholders' Association (ASA): Fifteen Top Financial Ratios to Evaluate Jordanian Banks' Performance," Journal of Applied Finance & Banking, SCIENPRESS Ltd, vol. 0, pages 7.
    5. repec:eee:jmacro:v:54:y:2017:i:pb:p:373-392 is not listed on IDEAS

    More about this item

    Keywords

    Banks&Banking Reform; Emerging Markets; Access to Finance; Debt Markets; Markets and Market Access;

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