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JOURNAL OF ACCOUNTING AND FINANCE

Competition in the Banking System: Evidence from Turkey

Using the Panzar–Rosse Model

Author(s): Rifat Gorener, Sungho Choi

Citation: Rifat Gorener, Sungho Choi, (2013) "Competition in the Banking System: Evidence from Turkey Using the Panzar–Rosse Model," Journal of Accounting and Finance, Vol. 13, Iss. 2, pp. 125 - 108

Article Type: Research paper

Publisher: North American Business Press

Abstract:

This paper uses the Panzar–Rosse model to investigate the competitive conditions in the Turkish banking

system over the period of 1992–2009. We break down the entire sample period into three distinctive

periods: the pre-crisis period (1992–1998), characterized by financial deregulation, an increase in the

number of banks, and a decrease in market concentration; the crisis period (1999–2003), characterized

by a surge in non-performing loans, negative profits, and re-regulation; and the post-crisis period (2004–

2009), characterized by bank consolidation and an increase in market concentration. The results indicate

that the H-statistic increases significantly from 0.5623 for the period of 1992–1998 to 0.8700 for the

period of 1999–2003, and increases to 0.8935 for the period of 2004–2009. The Wald test rejects the

hypothesis of a monopolistic market structure (H = 0) at the 1% level and also rejects the hypothesis of a

perfectly competitive market structure (H = 1) at the 1% level except for the period of 1999–2003. The

empirical findings suggest that the Turkish banking market was monopolistically competitive during the

pre-crisis period (1992–1998) and the post-crisis period (2004–2009), but the level of competition

increased to perfect competition for the period of 1999–2003, the crisis period. The findings also indicate

that the Turkish commercial banking market was in long-run equilibrium before the crisis caused

disequilibrium, but made adjustments to the new equilibrium.