Structure and Market Power in the South African Banking Sector

Nomasomi Ngonyama and Munacinga Simatele

The African Finance Journal, 2020, vol. 22, issue 2, 22-39

Abstract: Policy makers determine the nature of competition in industries using measures such as the Hirschman-Herfindahl index and concentration ratios. The literature however suggest that more direct measures in the New Empirical Industrial Organisation approach are more direct and better measures of competition. The findings of these measures however sometimes conflict and do not align with the observed behaviour of banks. The paper employs three different measure of competition including the Lerner Index, the Panzar-Rosse H-statistics and Boone indicator to interrogate which measure gives results that are more indicative of market behaviour. The results indicate that the Lerner and Boone indicator measures maybe more accurate as a measure of bank behaviour. Further, we suggest that the main reason for contradictory results and may be more a data than a methods problem.

Keywords: Structure; Market Power; competition measures; Banking Sector; South Africa (search for similar items in EconPapers)
JEL-codes: D D21 D43 (search for similar items in EconPapers)
Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:afj:journl:v:22:y:2020:i:2:p:22-39

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