Abstract
The aim of this study is to assess the market structure and efficiency of QISMUT (Qatar, Indonesia, Saudi Arabia, Malaysia, United Arab Emirates and Turkey) banking market over the study period of 2006 to 2016. Concentration ratio and Herfindahl-Hirshman Index are used to measure market structure while efficiency is measured using Data Envelopment Analysis (DEA). The results show conventional banks in QISMUT are more concentrated than its counterpart, the Islamic banks. However, Islamic banks are found to be more efficient than the conventional banks.
Highlights
The presence of foreign banks in domestic market is one of the factors that affects the number of the banks in the industry. Mason (1939) mentioned that market structure affects the performance of the firms which is known as conduct in ‘Structure-Conduct-Performance’ paradigm
The results of this study show QISMUT Islamic banks are more concentrated as compare to conventional banks; which could be explained by the dominance of Islamic banks in the context of QISMUT banking market
The findings indicate QISMUT Islamic banks are more efficient than the conventional banks
Summary
The presence of foreign banks in domestic market is one of the factors that affects the number of the banks in the industry. Mason (1939) mentioned that market structure affects the performance of the firms which is known as conduct in ‘Structure-Conduct-Performance’ paradigm. The presence of foreign banks in domestic market is one of the factors that affects the number of the banks in the industry. Mason (1939) mentioned that market structure affects the performance of the firms which is known as conduct in ‘Structure-Conduct-Performance’ paradigm. Increasing number of banks directly affects the market structure and competition in industry. This has been supported by Rajan and Zingales (2003) which mentioned that entry of foreign banks could trigger the competition. On this note, Andries and Capraru (2012) mentioned competition affects the performance of the banks in terms of efficiency while Apergis and Polemis (2016) claimed efficiency of banks is triggered by the competition in context of European banking scenario. On this note, Andries and Capraru (2012) mentioned competition affects the performance of the banks in terms of efficiency while Apergis and Polemis (2016) claimed efficiency of banks is triggered by the competition in context of European banking scenario. Schaeck and Cihak (2008) offered support to the former study that high competition would increase firms’ profits. Casu and Girardone (2009) added inefficient banks are mostly acquired by the big banks to improve the efficiency in industry
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