Concentration and Competition in the Azerbaijan Banking Industry

ABSTRACT: The main purpose of this thesis is to analyze competition and concentration levels in Azerbaijan Banking industry over the periods 2008-2011. In order to study concentration and competition level, 25 large banks were selected based on their market share. Measurement of concentration and competition are important for banks conduction in the banking industry. There are numerous measures to find concentration and competition level. We analyze the degree of concentration by using CR3, CR5, CR10 and Herfindahl-Hirschman Index for the bank assets, deposits and credit portfolios and to measure competition we apply famous Panzar-Rosse H-statistic. A panel regression is used to maintain empirical analysis in order to determine H-statistic. After the 1990 years Azerbaijan banking system has faced many changes, thus the research examines the nature and changes in the banking sector. There were similar works about competition and concentration in Azerbaijan banking sector which have done by F.Huseynov and X.Huseynov (2008), S.Aliyev (2010) for 2003-2007 years and for only 2010 year respectively. Both author used structural methods for determining competition level and k-bank concentration ratio to measure the concentration level. But in our thesis we used non-structural method for competition analyses and two different concentration approaches for concentration level. Keywords: concentration, competition, Azerbaijan banking industry. ……………………………………………………………………………………………………………………………………………………………………………………………………………………