An empirical investigation of efficiency, competitiveness, performance and market structure in the G.C.C. countries' banking industry

Al-Muharrami, Saeed 2005. An empirical investigation of efficiency, competitiveness, performance and market structure in the G.C.C. countries' banking industry. PhD Thesis, Cardiff University.

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Abstract

This thesis analyses the market structure, competitiveness, efficiency, and performance of the GCC countries' banking sector over the period 1993--2002. The study first examines the banking industry concentration using the concentration ratio of three largest banks (CR3) and Herfindahl-Hirschman Index (HHI) of concentration. Then, it assesses the competitive conditions using the Panzar-Rosse model. Third, it investigates the technical, pure technical and scale efficiency of commercial and Islamic banks using the Data Envelopment Analysis (DEA). In addition, change in banks' productivity growth was measured at this part by Malmquist Index. Finally, it investigates four different hypotheses explaining the relationship between market structure and performance using the Structure-Conduct-Performance (SCP) model. In relation to measurement of market concentration, it was found that the GCC banking industries are highly concentrated. Thus both indices indicated that these banking industries were ranging from 'some what' to 'very' concentrated markets. In terms of assessing competitive conditions, the results show that banks in Kuwait, Saudi Arabia and the UAE are earning their revenue under perfect competition. Bahraini and Qatari banks make their revenue in monopolistic competition. Oman's banks were making their total revenue under an 'undetermined' environment. Concerning technical efficiency and productivity growth, the results reveal that smaller banks exhibited superior performance in terms of overall technical efficiency than larger ones, mainly associated with diseconomies of scale. A decomposition of technical efficiency into pure technical and scale efficiency showed that large banks proved to be more successful in adopting best available technology (pure technical efficiency) while medium banks proved to be more successful in choosing optimal levels of output (scale efficiency). Islamic banks proved to be more successful in both the adoption of the best available technology and choosing optimal levels of output than commercial banks. Malmquist analysis showed downward shift in the average efficiency of banks. In last part, the thesis assesses the relevance of the Structure-Conduct-Performance (SCP) and the Relative-Market-Power (RMP) hypothesis and the Efficient-Structure (ES) hypotheses in the form of Technical efficiency or Scale efficiency to explain the performance of the banking industry in GCC countries and, finally, to test the existence of 'Quiet Life Hypothesis' in these markets. Results observed supported the Market Structure hypotheses and the quiet life effect was also observed. Thus, GCC banks were working in concentrated markets and were enjoying 'Quiet Life', therefore, gaining their profits in a more relaxed environment

Item Type:	Thesis (PhD)
Status:	Unpublished
Schools:	Business (Including Economics)
Subjects:	H Social Sciences > HG Finance
ISBN:	9781303165627
Date of First Compliant Deposit:	30 March 2016
Last Modified:	29 Jun 2022 12:31
URI:	https://orca.cardiff.ac.uk/id/eprint/55557

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