Relationship between Market Structure and Bank Performance: Empirical Evidence for Central and Eastern Europe

Csaba Móré () and Márton Nagy ()
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Csaba Móré: Magyar Nemzeti Bank
Márton Nagy: Magyar Nemzeti Bank

No 2003/12, MNB Working Papers from Magyar Nemzeti Bank (Central Bank of Hungary)

Abstract: This study aims to assess the role of market structure in the pricing behaviour and profitability of Central and Eastern European banks. In order to determine the most important variables related to the banks' pricing behaviour and profitability, we create a simple Cournot model. Then using these exogenous variables we build non-formal equations for testing the SCP (structure-conduct-performance) and the RMP (relative market power) hypotheses. Using the data of individual banks of eight Central and Eastern European countries in the period of 1998-2001 the tests reject the SCP hypothesis, but confirm the RMP hypothesis. In addition, we show that other factors, such as costs, risks, reserve ratio as well as the depth of bank intermediation also play an important role in banks' performance.

Keywords: bank performance; market structure; market power. (search for similar items in EconPapers)
JEL-codes: D43 G21 L13 (search for similar items in EconPapers)
Pages: 49 pages
Date: 2003
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Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:mnb:wpaper:2003/12

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