How competitive is the Syrian banking sector? Empirical evidence from ‘pre/post’ war Syria

Abstract

AbstractThis paper investigates the degree of market power in the Syrian banking sector over the period 2005–2016 where research on competitive conditions does not exist. The degree of competitiveness is assessed based on the revenue elasticity to input prices approach and is related to a set of market indicators. To test whether the Syrian crisis has altered the competitive conditions over the years of the sample, I divide the full sample into two subsamples, namely the pre‐crisis years (2005–2012) and the crisis years (2013–2016). The results suggest that banks in Syria earn their interest and total revenue under conditions of monopoly. I find that the trend of market structure—characterized by a monopoly—in the pre‐crisis years continues over crisis years. My findings provide robust evidence that a collusive behaviour among banks is in operation in the banking sector of Syria. The difficult penetration into/exit from the market has led to the existence of a profit‐curb mechanism for the Syrian banks, hence, an upward shift in the marginal cost curve will be associated with a reduction in revenue as a result of the optimal condition for these banks which act as monopolists.