Competition and Contestability in Transition Banking: An Empirical Analysis

Abstract

In this paper we focus on the market structure of the banking system in a set of Transition countries. In particular, by employing reduced-form revenue equations in a panel framework we are able to estimate the Panzar-Rosse h-statistic. We mainly control for heterogeneity by conditioning our estimation on bank-specific characteristics so as to account for differences in financial risk, size and finance mix. Our empirical results indicate that for the vast majority of cases banking systems operate under Monopolistic Competition.