Market Structure and Performance in the GCC Banking Sector: Evidence from Kuwait, Saudi Arabia, and UAE | صندوق النقد العربي

Market Structure and Performance in the GCC Banking Sector: Evidence from Kuwait, Saudi Arabia, and UAE

Saturday, January 1, 2005
Dr. Ibrahim Al-Karasneh and Miss Ayten Fatheldin.
Title Market Structure and Performance in the GCC Banking Sector: Evidence from Kuwait, Saudi Arabia, and UAE
Author Dr. Ibrahim Al-Karasneh and Miss Ayten Fatheldin.
Publication Date 01/01/2005
Description
There are two main competing approaches with regard to market structure and business performance. These are the structure-conduct-performance (SCP) paradigm and the efficient market (EM) hypothesis. The former emphasizes market collusion, while the latter stresses the superior operating efficiency of particular firms. In this paper we present the results from testing both hypotheses in the Kuwaiti, Saudi, and UAE banking markets for the period 1999-2002. The results support the EM hypothesis in both Kuwait and the UAE, and the SCP paradigm in Saudi Arabia. Thus, our findings suggest that promoting bank mergers in Kuwait and the UAE will enhance their efficiency, while in Saudi Arabia this would lead to higher concentration and hence less competition and profitability in the entire banking system.
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