This study examines the competitiveness of the Korean banking industry using the Panzar-Rosse H-statistic. The empirical analysis uses a panel data set of 25 banks for the period of 1992-2006. There is evidence that the intensity of competition in the...
This study examines the competitiveness of the Korean banking industry using the Panzar-Rosse H-statistic. The empirical analysis uses a panel data set of 25 banks for the period of 1992-2006. There is evidence that the intensity of competition in the Korean banking industry is changed throughout the bank consolidation since the Korean currency crisis in 1997. In order to estimate H-statistic as changing the market conditions, four subsamples are taken: the period 1992-1997, 1999-2006, 1999-2002 and 2003-2006.As a result, H-statistic for the period of 1999-2002 is bigger than for the period of 1992-1997. It implies that the Korean banking market has been more competitive after the restructuring in the banking industry done by the government. On the other hand, H-statistic for the period of 2003-2006 is smaller than for the period of 1999-2002. It implies that the market competition has weakened after the consolidation among large banks for the period of 2001-2004. Therefore it is needed to monitor the competitiveness of the Korean banking industry in order to prevent the monopoly.