Market Structure and competition in the South African banking sector
Munacinga Simatele ()
Additional contact information
Munacinga Simatele: University of Fort Hare, Nedbank Chair, Economics department
No 2204816, Proceedings of Economics and Finance Conferences from International Institute of Social and Economic Sciences
This paper examines the relationship between bank structure, performance and competition in the South African banking industry. South Africa has a very concentrated banking industry with a C4 concentration ratio of over 80%. The structure conduct performance hypothesis would suggest that competition in the sector would therefore be very low. We apply the Panzar-Rosse approach to bank level data for the period 1997 to 2014 to assess the competitive environment in the South African banking industry. We estimate a revenue equation to obtain the H statistic. Changes in competition over the sample period are explored by estimating a time varying Panzar-Rosse H statistic. This also allows us to assume a gradual change in bank competition rather than a static equilibrium. We find that competition has increased over time. This result is consistent no matter how the time variable enters the revenue equation. The estimated H statistic suggests that banks operate in a monopolistically competitive market structure. Bank specific factors are generally consistent across alternative measures and in line with expectations. We also find that the increased concentration arising from the currency crisis in 2001/02 does not reduce the level of competition. This result is somewhat puzzling because the industry exhibits relatively high transactions fees in the larger banks.
Keywords: bank performance; competition; Panzar-Rosse; South Africa (search for similar items in EconPapers)
JEL-codes: G21 L10 (search for similar items in EconPapers)
Pages: 1 page
References: Add references at CitEc
Citations: View citations in EconPapers (3) Track citations by RSS feed
Published in Proceedings of the Proceedings of the 4th Economics & Finance Conference, London, Sep 2015, pages 51-51
Downloads: (external link)
https://iises.net/proceedings/4th-economics-financ ... =22&iid=051&rid=4816 First version, 2015
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:sek:iefpro:2204816
Access Statistics for this paper
More papers in Proceedings of Economics and Finance Conferences from International Institute of Social and Economic Sciences
Bibliographic data for series maintained by Klara Cermakova ().