Competition, Contestability and Market Structure for Securities Firms in Taiwan

Abstract

The purpose of this study is to investigate securities firms’ market structure and contestability in Taiwan over the period from 1998 to 2006. This is the first study to integrate structural and non-structural approaches to the evaluation of competitive conditions in securities firms. The findings of this study have managerial implications, as the results show that market share is positively related to profitability but negatively related to efficiency, implying that the pursuit of market share may not be an appropriate strategy for securities firms. Empirical results show that securities firms are not in perfect competition and that the market is instead characterised by monopolist competition. The results regarding changes in the degree of competition show that securities firms’ competitive condition is not improving. The government is to advance a serial of financial reform policies, but they do not affect securities firms, so the market remains a monopolist competitive environment with a lower level of contestability.