International Journal of Financial Management

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Empirical Evidences on Structure-Conduct-Performance Relationship In Banking Sector:A Literature Review


Affiliations
1 UNISA, Vice President, Debub Global Bank S.C, Ethiopia
2 School of Commerce, College of Business and Economics, Addis Ababa University, Ethiopia
     

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A detailed review of existing literature on the structure-conduct-performance (SCP) relationship indicates that the empirical divergence between SCP and competing hypothesis is still not conclusive which is attracting many research works across the world, and recently in Africa. Studies on SCP are dominated by quantitative analysis with exclusion of non-quantifiable variables such as related to conduct and/or those lack data (regulation). The majority of studies employ a multiple linear regression model where a measure of bank performance (mostly profit) is regressed on market concentration variables (such as k-firm, Herfindahl-Hirschman Index, etc.) along with some control variables. Studies that used the structure model have limited focus on other key variables like regulation, macroeconomic, and industry factors. They have also applied a quantitative approach and assumed conduct as being a derivative of the market structure. Hence, there was no attempt to explore the behavior of banks within the given structure, banking, and macro environment. Few studies have explicitly considered Ethiopia’s banking performance using the structural approach (SCP or ESH). Nevertheless, the existing bank performance studies were not analyzed incorporating big banks in the industry, with long period observation of banks, using parametric and non-parametric methods, which are scarce in the Ethiopian context.

Keywords

Structure, Conduct, Performance, Bank, Ethiopia.
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  • Empirical Evidences on Structure-Conduct-Performance Relationship In Banking Sector:A Literature Review

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Authors

Tesfaye Boru Lelissa
UNISA, Vice President, Debub Global Bank S.C, Ethiopia
Abdurezak Mohammed Kuhil
School of Commerce, College of Business and Economics, Addis Ababa University, Ethiopia

Abstract


A detailed review of existing literature on the structure-conduct-performance (SCP) relationship indicates that the empirical divergence between SCP and competing hypothesis is still not conclusive which is attracting many research works across the world, and recently in Africa. Studies on SCP are dominated by quantitative analysis with exclusion of non-quantifiable variables such as related to conduct and/or those lack data (regulation). The majority of studies employ a multiple linear regression model where a measure of bank performance (mostly profit) is regressed on market concentration variables (such as k-firm, Herfindahl-Hirschman Index, etc.) along with some control variables. Studies that used the structure model have limited focus on other key variables like regulation, macroeconomic, and industry factors. They have also applied a quantitative approach and assumed conduct as being a derivative of the market structure. Hence, there was no attempt to explore the behavior of banks within the given structure, banking, and macro environment. Few studies have explicitly considered Ethiopia’s banking performance using the structural approach (SCP or ESH). Nevertheless, the existing bank performance studies were not analyzed incorporating big banks in the industry, with long period observation of banks, using parametric and non-parametric methods, which are scarce in the Ethiopian context.

Keywords


Structure, Conduct, Performance, Bank, Ethiopia.

References