Market structure and power: comparative empirical evidence from a dual banking system

Countries cautiously observe their banking sector stability by virtue of its vital repercussions. Different researchers used different measures/proxies to investigate stability and its relevance to market structure and power, and mixed evidence was presented. In a dual banking system, the influence...

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Bibliographic Details
Published in:Economic change and restructuring 2022-08, Vol.55 (3), p.1815-1873
Main Authors: Harkati, Rafik, Alhabshi, Syed Musa, Kassim, Salina, Ariffin, Noraini Mohd
Format: Article
Language:English
Subjects:
Banking industry
Banking system
Banks
Commercial banks
Comparative studies
Development Economics
Dummy
Economic Growth
Economic Policy
Economics
Economics and Finance
International Economics
Investigations
Islam
Islamic financing
Liberalization
Macroeconomics/Monetary Economics//Financial Economics
Market structure
Markets
Morality
Policy making
Political Economy/Economic Systems
Power
Power structure
Stability
Standard scores
Subsidiaries
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Summary:Countries cautiously observe their banking sector stability by virtue of its vital repercussions. Different researchers used different measures/proxies to investigate stability and its relevance to market structure and power, and mixed evidence was presented. In a dual banking system, the influence of the market structure and power on stability is overlapped given the operation of two different types of banks side by side. This paper uses advanced Z-score (time-varying Z-score and adjusted Z-score) to extend evidence and disentangle the stability linkage between the banking sector, Islamic and conventional banking markets. Quarterly data of 41 commercial banks operating in the Malaysian dual banking sector for the period 2011q4-2020q2 are obtained from FitchConnect database. The study applies the Corrected Least Square Dummy Variable (LSDVC) estimator in the investigation given its superior performance over other commonly used techniques. Diverse important results and conclusions are observed and drawn as in which manner structure and power within the banking sector at large, Islamic and conventional banking markets influence stability of each other, and to which extent the Islamic market is distinguishable and free from the influence of conventional market features. Policy makers and researchers need to be mindful of the used stability proxy and its dynamism.
ISSN:1573-9414
1574-0277
DOI:10.1007/s10644-021-09369-x