The Competitive Conditions of the Banking Industry in the Post-Crises Period: An Analysis of Turkish Banks

Abstract

After the 2000-2001 financial crises, the Turkish banking sector experienced a process of concentration, with the tendency for merger and acquisition activities, the revocation of licenses and the liquidation of some insolvent banks. This paper assesses the competitive structures in the Turkish banking industry over the period 2003-2011 using a rigidly statistical method of Panzar-Rosse (1987), and examines whether the banking system was affected by the structural changes initiated in the post crises period. The results indicate that competition in the banking sector is most accurately characterized by the theoretical model of monopolistic competition for the period under consideration. There is no evidence that the deregulation adopted after the crises resulted in a significant change in the competitive conditions in Turkish banking industry.