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An Analysis of Concentration and Competition in the Banking Sector of the Republic of Serbia

Author

Listed:
  • Radojičić Jelena

    (University of Niš, Faculty of Economics, Serbia)

  • Jemović Mirjana

    (University of Niš, Faculty of Economics, Serbia)

  • Dragijević Dejan

Abstract

The degree of the banking sector concentration is a structural variable and refers to the number of banks in the system and the degree of their market power. The importance of measuring concentration in the banking sector stems from the causal relationship between the market structure and the competitive behaviour of market participants. Traditional models measuring the banking sector competition proceed from the market structure and concentration measures. In contrast, modern approaches to measuring competition rely on non-structural models and analysis of the behaviour of market participants. The paper analyzes the degree of concentration and competition in the banking sector of the Republic of Serbia. The traditional and most frequently used indices, the concentration ratio and the Herfindahl-Hirschman index, are used to measure concentration. The values of these indices show low banking sector concentration but a rise in the observed period. The values of the comprehensive industrial concentration index and the entropy coefficient confirm the concentration absence in the banking sector of the Republic of Serbia. In addition to the usual banking sector concentration measures, the authors use the Linda index to assess the banking sector concentration and competitiveness, to show the absence of an oligopolistic structure in terms of total balance sheet assets, lending and deposit activity of banks.

Suggested Citation

  • Radojičić Jelena & Jemović Mirjana & Dragijević Dejan, 2021. "An Analysis of Concentration and Competition in the Banking Sector of the Republic of Serbia," Economic Themes, Sciendo, vol. 59(4), pages 427-444, December.
    • Handle: RePEc:vrs:ecothe:v:59:y:2021:i:4:p:427-444:n:6
    DOI: 10.2478/ethemes-2021-0024
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    References listed on IDEAS

    as
    1. Polina Stazhkova & Tatyana Kotcofana & Alexander Protasov, 2017. "Concentration Indices In Analysis Of Competitive Environment: Case Of Russian Banking Sector," CBU International Conference Proceedings, ISE Research Institute, vol. 5(0), pages 458-464, September.
    2. Florian LEON, 2014. "Measuring competition in banking: A critical review of methods," Working Papers 201412, CERDI.
    3. Dragan Lončar & Vesna Rajić, 2012. "Concentration And Competitiveness O The Banking Market In Serbia: Current Situation And Possible Future Changes Under The Influence Of Market Consolidation," Serbian Association of Economists Journal, SAE - Serbian Association of Economists, issue 7-8, pages 372-385, December.
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    More about this item

    Keywords

    concentration; competition; banking sector; concentration ratio; Herfindahl-Hirschman index; Linda index;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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