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
Date Written: May 1, 2008
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: Suggested Citation