The competition and market structure in the Saudi Arabia banking

What is it about?

Purpose: The purpose of this paper is twofold: to investigate the market structure of Saudi Arabia banking industry; and to evaluate the monopoly power of banks during the years 1993-2006. Design/methodology/approach: The paper is examining the market structure using the most frequently applied measures of concentration k-bank concentration ratio (CRk) and Herfindahl-Hirschman Index (HHI) and it is evaluating the monopoly power of banks using the “H-statistic” by Panzar and Rosse. Findings: The results show that Saudi Arabia has a moderately concentrated market and is moving to a less concentrated position. Both the concentration indices indicate that the country is moving toward a better position in terms of the market concentration. The Panzar and Rosse “H-statistic” suggests that banks in Saudi Arabia operate under monopolistic competition. Research limitations/implications: These findings may be a temporary effect, evident during the sampled period only. To draw firmer conclusions a longer sample period is needed. Originality/value: Studies of banking market structure in the developed economies’ banking are commonplace, however, very few studies are conducted for Saudi Arabia’s banking industry.

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