The Effect of Changes in Market Structure on Competition and Firm Profitability: Does Market Maturity Matter?

Posted: 8 May 2008 Last revised: 10 Jun 2011

See all articles by Andreas Dietrich

Andreas Dietrich

Lucerne University of Applied Sciences and Arts

Andreas Walter Mattig

University of St. Gallen

Date Written: May 1, 2008

Abstract

Having concluded that changes in market structure affect competition and firm performance within an industry, literature continous to alter between two grand theories: the "Structure-Conduct Performance" hypothesis and the "Efficient Structure" hypothesis.

This paper proposes a link between the two concepts, using market maturity as intermediator. The central argument is that the degree of structural change dependency is positively mediated by financial market maturity. Utilizing a cross-country dataset, the paper provides evidence that the degree of financial market development mediates and hence ultimately sets the economic conditions in which banks compete. The results have direct implication on economic policy when comparing emerging and established financial service systems.

Keywords: Bank Competition, Structure Conduct, Efficient Structure, Market Maturity

JEL Classification: G15, G21, L10, O10, O50

Suggested Citation

Dietrich, Andreas and Mattig, Andreas Walter, The Effect of Changes in Market Structure on Competition and Firm Profitability: Does Market Maturity Matter? (May 1, 2008). Available at SSRN: https://ssrn.com/abstract=1129353

Andreas Dietrich

Lucerne University of Applied Sciences and Arts ( email )

IFZ Institute of Financial Services Zug
P.O. Box 4332
Zug, CH-6304
Switzerland

Andreas Walter Mattig (Contact Author)

University of St. Gallen ( email )

Rosenbergstrasse 52
CH-9000 St. Gallen, 9000
Switzerland

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