Article Synopsis

  • The study investigates how market concentration influences bank efficiency in emerging economies, focusing on 225 banks across 18 MENA countries from 2006 to 2020.
  • It finds a significant positive relationship between banking market concentration and bank efficiency, especially notable in Islamic banks during the COVID-19 pandemic.
  • The research highlights that the effects differ among banks based on ownership structure, with government-owned banks showing a stronger correlation with market concentration and efficiency.

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Article Abstract

This study aims to contribute to the existing literature that explores the impact of market concentration on bank efficiency in emerging economies. Using a sample of 225 banks in 18 countries in the Middle East and North Africa (MENA) region over the period 2006-2020, we empirically investigate the significance of this relationship. Since the evidence of concentration effect on efficiency during the COVID-19 outbreak is ambiguous, we test the hypothesis that the efficiency is positively affected by the level of banking market concentration in the MENA region. We adopt fixed effect model specifications and test the robustness of our results with the two-step Generalized Method of Moments (GMM) estimation technique. Our analysis finds a strong positive association between market concentration and bank efficiency. The analysis of different types of banking systems that co-existing in the MENA region (Islamic and conventional) indicates the market concentration effect is more pronounced when the banking institution is Islamic and during the COVID-19 outbreak. Moreover, the better economic performance of Islamic banks during the initial stage of pandemic further increases their efficiency. Our analysis indicated that the impact of market competitive conditions on bank efficiency varies significantly across banks with different ownership structures and is more pronounced for government-owned banks. The results are robust using different model specifications and alternative estimation techniques.

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Source
http://www.ncbi.nlm.nih.gov/pmc/articles/PMC10171612PMC
http://journals.plos.org/plosone/article?id=10.1371/journal.pone.0285403PLOS

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