آیا ساختار بازار بر سودآوری و ثبات بانک ها اهمیت بسزایی داشته است؟ اقتصادهای در حال ظهور در مقابل اقتصادهای پیشرفته
|کد مقاله||سال انتشار||تعداد صفحات مقاله انگلیسی||ترجمه فارسی|
|19871||2013||18 صفحه PDF||سفارش دهید|
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Publisher : Elsevier - Science Direct (الزویر - ساینس دایرکت)
Journal : Journal of Banking & Finance, Volume 37, Issue 8, August 2013, Pages 2920–2937
We empirically investigate the effects of market structure on profitability and stability for 1929 banks in 40 emerging and advanced economies over 1999–2008 by incorporating the traditional structure-conduct-performance (SCP) and relative-market-power (RMP) hypotheses. We observe that a greater market share leads to higher bank profitability being biased toward the RMP hypothesis in advanced economies, yet neither of the hypotheses is supported for profitability in emerging economies. The SCP appears to exert a destabilising effect on advanced banks, suggesting that a more concentrated banking system may be vulnerable to financial instability, however, the RMP seems to perform a stabilising effect in both economies. Evidence also highlights that profitability and stability increase with an increased interest-margin revenues in a less competitive environment for emerging markets. Overall, these results suggest that although policy measures to promote competition may dampen economic rent, excessive implementation may have an undesired destabilising impact on banks.
It is argued that the market structure matters for banks’ power in setting interest rates that can directly affect their performance. A positive statistical relationship between measures of market structure, such as concentration or market share and profitability has been reported by many banking studies (e.g. Molyneux and Thornton, 1992 and Berger, 1995). Berger (1995) advocates two hypotheses from such a relationship. One of them is the structure-conduct-performance (SCP) paradigm, where, in highly concentrated markets, firms can set prices that are less favourable to consumers as a result of imperfectly competitive markets. In a concentrated banking system, a bank can set higher spreads by imposing higher lending rates and lower deposit rates. The other hypothesis is the relative-market-power (RMP) paradigm where firms with well-differentiated products can increase market share and exercise their market power in pricing products, thus earning supernormal profits. With respect to the impact of market structure on banking stability, both economic theory and empirical evidence are inconclusive. In the literature, there are two contrasting views on the relationship between concentration and stability, namely the ‘concentration-stability’ and the ‘concentration-fragility’ views. According to the former, more of a concentrated banking system may decrease risk through increasing franchise value, whilst the latter suggests that market power gained through concentration increases risk through the setting of higher interest rates. While there is a large literature that banks rationally choose more risky portfolios when confronted with increased competition (less concentration), new studies find risk-incentive mechanisms that banks take on more risk when they become more concentrated. This paper empirically re-examines the effect of market structure on both profitability and stability in banking sectors. We utilise data from 23 emerging economies (10 Eastern European and 13 Middle Eastern countries) and 17 Western European countries, containing relatively large panel data for a total of 1929 banks over the period 1999–2008. Incorporating both the traditional structure-conduct-performance (SCP) and the relative-market-power (RMP) hypotheses, the market structure analyses are performed by regressing bank performance indicators on measures of market power together with bank-specific characters, financial structure variables and macroeconomic conditions. We make an allowance for the differences between banks operated in emerging and developed countries. We aim to address some fundamental questions. Firstly, can the hypotheses of RMP and SCP be applied to the emerging market banking system in terms of profitability and stability? Secondly, why are banks operated in the emerging economies more profitable than their counterparts in advanced economies?1 Thirdly, to what extent are discrepancies in determinants of bank risk and returns due to variations in factors under the control of bank management and/or factors relating to financial structures? We systematically compare the emerging market banking systems with their counterparts in advanced markets. In particular, identifying the factors that lead to the differences may explain the effectiveness of financial institutions and also help us better understand the banking industry in emerging economies. The main contributions of our paper are largely twofold. Firstly, this is a joint analysis of profitability and stability. The international banking industry has undergone substantial structural reforms over the last two decades. There have been fundamental changes in the behaviour of banks with emphasis not only on profitability, but also on stability with comprehensive asset management in recent periods. It is particularly important for emerging countries to ensure that the banking system is stable. Such a banking development should lead to private and infrastructural projects being financed effectively and funds allocated efficiently. As Albertazzi and Gambacorta (2009) argue, because of phenomena such as globalisation, growing international financial markets, deregulation and advances in technology, identifying the determinants of bank performance is an important predictor of unstable economic conditions. Athanasoglou et al. (2008) also point out that a profitable banking system is likely to absorb negative shocks, thus maintaining the stability of the financial system. On the other hand, an inadequate regulatory bank environment with a higher degree of information asymmetry may lead to high profitability, but it is indicative of high risk premia, and these can cause financial instability (Hellmann et al., 2000). The investigation of such a joint effect on both profitability and stability of market structure is, to the best of our knowledge, extremely limited. In this paper, we can analyse whether the relatively high returns of banks are accompanied by increased stability by exerting market power due to less competitive market conditions. If this is the case, the excessive implementation of measures to promote competition may have destabilising effects on banks. Since there is a wider interest in the effect of augmented competition and deregulation on banking systems, our empirical results may provide useful policy implications. The second contribution is the behaviour of emerging market. In the new global economy, there has been an increasing interest in measuring profitability in emerging markets. However, studies of the profitability-market power relationship in emerging markets have been limited, being considerably less rigorous, lacking in detailed accounts of the determinants of bank profitability. This paper fills the gap by widening the scope of explanatory variables, not only in terms of market structure, but also with a wider range of other control factors, without which the model would suffer from the omitted variables. The importance of our comparative study lies in the development and improvement of the banking sector in emerging economies. The Middle East and the Eastern Europe would appear to be one of the appropriate choices for the study of emerging economies, since each has its unique points of difference. The Middle Eastern banking system is fairly concentrated being dominated by Islamic banks and, at least until the late 1990s, was tightly regulated and protected from foreign competition. Hence, the improvement of the banking environment in this region would provide more opportunities to enter into the international markets. Eastern Europe formerly dominated by state-owned banks has recently converged with the European Union and follows European banking rules. It follows that legal and financial infrastructures need to be established in order to penetrate the major EU markets. The Western banking system is a good benchmark in which banks operate under a highly competitive environment. Indeed, in the preliminary data analysis in Section 2, we have found distinctive features in profitability and market structure between these emerging markets and developed EU markets, providing the meaningfulness of our study. Different determinants call for different policy actions. If profitability and stability determinants can be effectively identified in relation to the market structure, fundamental reform could be undertaken by policy makers. If, on the other hand, determinants were dominated by bank-level variables, promoting more stakeholder power would be desirable. If determinants are clearly identified macroeconomic variables, actions in terms of bank reform could be undertaken by macroeconomic policy makers. The main empirical findings are as follows. As in many studies presented in banking literature, we find a positive relationship between profitability and market share in advanced economies: banking systems in developed countries are generally biased toward the RMP hypothesis. However, the data do not seem to support the hypothesis on the profitability in emerging market banking systems. The results also show that the more concentrated the banking system in advanced economies is, the more vulnerable it is to systemic risk, supporting the concentration-fragility hypothesis, yet a higher market share seems to exert a stabilisation effect in both economies. Bank-specific variables and financial structures seem to exert a significant effect on both types of banks, in particular, higher interest rate spreads increase profitability and stability. For emerging banks this seems to be one of the key factors to increase their profitability. The remainder of this paper is structured as follows. In Section 2 we compare the state of market structure and profitability for both emerging and advanced banking systems, which reinforces the importance of our study. Section 3 presents a literature review of related studies. Section 4 specifies the model for estimation and describes the variables used for this study. Section 5 summarises the data descriptive statistics. The empirical results are reported in Section 6. Section 7 concludes and provides a number of policy implications.
نتیجه گیری انگلیسی
This paper empirically investigates the effects of market structure by controlling bank-specific characteristics, overall financial structure and macroeconomic environment on profitability and stability of banks in emerging and advanced economies during the period of 1999–2008. In particular, we assessed the extent to which the relatively high profitability in emerging banking systems can be attributed to less competitive market conditions. We have shown that there are large differences in profitability among the banks in our sample, and that a significant amount of this variation can be explained by the factors included in our analysis. Market share has no significant impact on bank profitability in emerging markets, providing little evidence in support of the RMP hypothesis, whereas we find evidence to support the hypothesis in advanced economy banking systems. The effect of market concentration on profitability is either insignificant on advanced banking market or the unexpected negative impact on Middle East. Regarding bank stability, concentration is negatively associated with bank soundness in advanced economies, suggesting that concentrated markets may encourage risk-taking behaviour in banks. This is contrasted with the stabilising role of market share found for both emerging and advanced banks. The empirical findings have several implications for policy makers. Firstly, given the overall robust impact of bank-specific variables that are specified as control variables, the conventional wisdom of bank prudential regulations continues to be implemented, e.g. bank managers should undertake the necessary measures to enhance the role of capitalisation, and to create efficient cost-control. Secondly, although during the period under study, there was a significant decrease in the market concentration of emerging market banks (recall Fig. 1c), there is scope for further reduction without jeopardising the level of profitability. This should also be encouraged for advanced economy banks, given the destabilising effect of concentration. A fall in banking concentration ratios could be promoted through a variety of ways. Antitrust enforcement or anti-collusion regulatory action may indeed be stressed, also policies that penalise or impair mergers and acquisitions may be considered. Thirdly, in emerging economies, profits seem to be derived at a cost to the remainder of the economy where higher prices are imposed on borrowers and lenders, yet, at the same time, a higher profit margin is found to be contributory to stability in emerging banks in a less competitive environment. Thus, when implementing measures to boost competition, such as the removal of unnecessary restrictions and entry-barriers in establishing new private or foreign banks, there is need for a careful approach, otherwise excessive anti-competitive measures may threaten bank stability. Another important implication drawn from our empirical results is that although the RMP hypothesis dominates in the advanced-market banking system, the power of market share has an effect of stability, which policy makers should bear in mind when they regulate their anti-monopolistic provisions. Overall, these results suggest that although measures to promote competition may dampen economic rent, excessive implementation may yield an undesired destabilising effect on banks.