Measuring Concentration and Efficiency in Bosnia and Herzegovina Banking Sector using Dynamic Panel Model

Rebić Mladen (), Paunović Slađana () and Popović Borka ()
Additional contact information
Rebić Mladen: Associate Professor, Faculty of Economics, University of East Sarajevo, Alekse Šantića 3, 71420 Pale, Bosnia and Herzegovina
Paunović Slađana: Assistant Professor, Faculty of Economics, University of East Sarajevo, Bosnia and Herzegovina
Popović Borka: Assistant Professor, Faculty of Economics, University of East Sarajevo, Bosnia and Herzegovina

South East European Journal of Economics and Business, 2022, vol. 17, issue 1, 14-29

Abstract: This paper seeks to examine the determinants of the profitability of the B&H banking sector, using an empirical framework that incorporates the traditional SCP - structure conduct-performance and ESX efficiency hypothesis. The main goal of this paper is to measure the level of concentration and investigate how concentration and other determinants influence the profitability of the banking sector in Bosnia and Herzegovina for the period from 2008 to 2017. We also tried to determine whether the profitability of the banking sector is more contributed by concentration, i.e. enlargement of the banking market (SCP) rather than increased efficiency of banking organization (ESX). For this purpose, we use a sample of 26 banks from B&H, and our empirical research is based on panel data analysis. The performance of the banking sector is measured by the conventional return on assets (ROA). Besides concentration as a main industry-specific factor, profitability determinants include bank-specific and macroeconomic profitability factors. Obtained results reveal that concentration has positive impacts on B&H banking profitability. But when we talk about competing concentration hypotheses, the paper results here generally support the ESX efficiency hypothesis rather than the traditional SCP approach. It was confirmed that credit risk, deposit risk and cost to income ratio from bank-specific variables, and GDP growth rate from macroeconomic variables have a statistically significant influence on banking performance.

Keywords: Concentration; efficiency; performance; panel data analysis; banking profitability (search for similar items in EconPapers)
JEL-codes: C33 G21 L10 L40 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://doi.org/10.2478/jeb-2022-0002 (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:vrs:seejeb:v:17:y:2022:i:1:p:14-29:n:4

DOI: 10.2478/jeb-2022-0002

Access Statistics for this article

South East European Journal of Economics and Business is currently edited by Adnan Efendic, Vesna Babić-Hodović and Aziz Šunje

More articles in South East European Journal of Economics and Business from Sciendo
Bibliographic data for series maintained by Peter Golla ().