Bank Concentration and Its Impact on Financial Inclusion, Efficiency, and Stability: Evidence from Developing Countries

Emine Kaya ()

Panoeconomicus, vol. 0, issue 0, 1-12

Abstract: This study investigates the relations between financial stability, financial efficiency, and financial inclusion, which are all measured as index form, and bank concentration via principal component analysis for developing countries. A panel linear autoregressive distributed lag (L-ARDL) model is employed to explore these relations. The results indicate that bank concentration exerts a positive and significant impact on financial stability, financial efficiency, and financial inclusion. To ensure the robustness of the results, panel non-linear (NL-ARDL) and augmented mean group (AMG) models are also applied, with the resultant estimations confirming the consistency of the main results. According to the findings of the study, large banks play a vital role in the banking sector for developing countries due to their diverse financial products, market power, and cost-effectiveness. JEL: G10, G15, G20.

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