The Effects of Consolidation in the Korean Banking Industry on the Loan Market
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This paper investigates the effect of the market concentration of Korean banking industry on the loan market in terms of lending interest rate and loan amount using the data from Korean thirteen banks from 2001 to 2016. We also analyze the political economy of the concentration of the bank market through the government-led enlargement of the banking industry and the changes in the lending rate. One finding is that despite the rising market concentration of the banking industry, lending rates declined while loan amount increased. This implies that the merger of banks built up more efficiency to produce economies of scale, showing that efficiency hypothesis is more advantageous than market-structure-performance hypothesis. Another finding is that the government had an impact on bank lending market in Korea. This paper suggests that, contrary to public concern, bank competition can work despite monopolistic adjustments in Korean banking industry. It can be implied that an institutional mechanism to distort the financial market due to government intervention is needed rather than worrying about weakening competition due to monopoly.
Abstract
This paper investigates the effect of the market concentration of Korean banking industry on the loan market in terms of lending interest rate and loan amount using the data from Korean thirteen banks from 2001 to 2016. We also analyze the political economy of the concentration of the bank market through the government-led enlargement of the banking industry and the changes in the lending rate. One finding is that despite the rising market concentration of the banking industry, lending rates declined while loan amount increased. This implies that the merger of banks built up more efficiency to produce economies of scale, showing that efficiency hypothesis is more advantageous than market-structure-performance hypothesis. Another finding is that the government had an impact on bank lending market in Korea. This paper suggests that, contrary to public concern, bank competition can work despite monopolistic adjustments in Korean banking industry. It can be implied that an institutional mechanism to distort the financial market due to government intervention is needed rather than worrying about weakening competition due to monopoly.
참고문헌 (18)
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