Efficiency and Competition in Banking Industry: Case for ASEAN-5 Countries

Ulik Hertina Wuni Astuti, Putu Mahardika Adi Saputra

Abstract


This paper analyzes the level of the efficiency and competition (market structure) of ASEAN-5 banking industry from 2005 until 2016. Two methods were employed, i.e. Stochastic Frontier Analysis and Adjusted Lerner Index. The former is utilized to measure the bank efficiency in ASEAN-5 countries and the latter is applied to measure the bank competition (market structure) in ASEAN-5 banking industry. In order to connect the efficiency and competition level of ASEAN-5 banking industry, this study also utilizes quadrant analysis based on three different periods, namely the period before the global crisis (2005-2008), the period after global crisis (2009-2015), and the period after the establishment of ASEAN Economic Community –AEC- (2016). The results reveal that on average, the efficiency and the competition level of banks in ASEAN-5 countries are found to be relatively high. The competition in ASEAN-5 banking industry could be classified as monopolistic where each bank competes by diversifying their products or segments.


Keywords


bank; efficiency; competition; Adjusted Lerner Index; ASEAN.

JEL Codes


D24; D40; G21.

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References


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DOI: http://dx.doi.org/10.47743/saeb-2019-0011

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