Empirical Evidences on Structure – Conduct – Performance Relationship in the Banking sector-A Systematic Review of Literature
A detailed and systematic review of existing literature on the Structure-Conduct- Performance (SCP) relationship indicates that the empirical divergence between SCP and competing hypothesis is still not conclusive which is attracting a lot of research works across the world and recently in Africa. studies on SCP by large are dominated by quantitative analysis with exclusion of non-quantifiable variables such as related to conduct and/or those lack data (regulation).The majority of studies employ a multiple linear regression model where a measure of bank performance (mostly profit) is regressed on market concentration variables (such as k-firm, HHI etc) along with some control variables. Studies that used the structure model have also limited focus on other key variables like regulation, macroeconomic and industry factors. They have also applied a quantitative approach and assumed conduct as being a derivative of the market structure. Hence, there was no attempt to explore the behavior of banks within the given structure, banking and macro environment. Few studies have explicitly considered Ethiopia’s banking performance using the structural approach (SCP or ESH). Nevertheless, the existing bank performance studies were not analyzed incorporating big banks in the industry with long period observation of banks using parametric and non-parametric methods which are scarce in the Ethiopian context.
