An Empirical Evaluation of ‘Structure-Conduct-Performance’ and ‘Efficient-Structure’ Paradigms in the Banking Sector of Pakistan

Mahmood ul Hasan Khan () and Muhammad Hanif
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Mahmood ul Hasan Khan: State Bank of Pakistan

No 90, SBP Working Paper Series from State Bank of Pakistan, Research Department

Abstract: Based upon the indicators of market structure, this paper tests the relevance of Structure-Conduct-Performance (SCP), Relative Market Power (RMP), and the Efficient Structure (ES) paradigms for banking industry of Pakistan. We use a (balanced) panel data from 24 commercial banks of Pakistan from the year 1996 to 2015. Descriptive statistics and the formal tests suggest that: (a) there is a weak association between the indicators of market structure and banks’ performance in case of Pakistan; (b) the empirical evaluation results do not provide meaningful support to SCP or RMP paradigms; and (c) the ES paradigm is more relevant in case of Pakistan. At policy level, the findings of this paper suggest that the focus of policymakers should be to improve the efficiency of banking sector, as the excessive focus on indicators of market structure like concentration ratio to improve competition in the banking sector could be counterproductive.

Keywords: Structure-Conduct-Performance; Efficient-Structure; Competition; Banking Sector (search for similar items in EconPapers)
JEL-codes: D40 E50 (search for similar items in EconPapers)
Pages: 16 pages
Date: 2017-07
New Economics Papers: this item is included in nep-com, nep-eff and nep-mac
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Related works:
Journal Article: Empirical evaluation of ‘structure-conduct-performance’ and ‘efficient-structure’ paradigms in banking sector of Pakistan (2019)
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