Market structure and concentration: An application on Turkish banking sector

The banking sector is a strategic sector that affects the financial and real sectors of the economy, both as a crucial source of finance and its role in the monetary transmission mechanism. Therefore, the competitive structure, stability, and effectiveness of the banking sector are significant for the sustainability of economic growth. In this study, the market structure and competition level of the Turkish banking sector are investigated by employing a dynamic panel data method and using the data of the 2003-2018 period. For this purpose, within the framework of the non-structured Panzar-Rosse model, the first H statistical values were calculated for the period 2003-2018 and then for the 2003-2009 and 2010-2018 sub-periods to see the effects of the Global Financial Crisis. According to the findings, although it can be said that the Turkish banking sector has a monopolistic competitive structure in the period of 2003-2018, in accordance with the classification in the literature, it can be easily stated that the sector has an oligopolistic structure. In other words, the income of deposit banks in the sector increases less than the increase in input prices. H statistical values calculated for the 2003-2009 and 2010-2018 sub-periods reveal that the level of competition in the sector is notably low, although the oligopolistic structure is maintained. Also, when the H statistics calculated for the two sub-periods are compared, it is observed that the competition level of the sector decreased after the Global Financial Crisis. Keywords: Market Structure, Competition, Panzar-Rosse Model, Turkish Banking Sector