Testing for Competition in the South Korean and Chinese Commercial Banking Markets

Authors


Corresponding author: Kang H. Park, Southeast Missouri State University, Cape Girardeau, MO, USA 63701. Tel: 73-651-2942, Fax: 573-651-2947, email: khpark@semo.edu.

Abstract

This paper examines market concentration and competition in the South Korean and Chinese commercial banking markets for the period of 1992–2008. This study empirically investigates whether changes in bank concentration have affected the degree of competition in the Korean and Chinese commercial banking industries by estimating the H statistic of the Panzar-Rosse model. We also used the Boone Indicator model to confirm the results from the Panzar-Rosse model. The Korean banking industry has been monopolistically competitive for the entire sample period while the Wald test of the H statistic shows competition in the Korean banking actually increased to the level of perfect competition during the crisis period temporarily. Compared to the banking industry of Korea and other countries, the Chinese banking industry is still highly concentrated and its level of competition is closer to oligopoly.

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