Competition Structures of the Banking and Securities Industries in Korea
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The objective of this paper is to provide a comparative analysis of the competition structures of the two main types of financial intermediation in Korea, the banking and securities industries. The competition structure of each collectively determines that of the industry as a whole. Two approaches are adopted: quantitative market concentration measures and a qualitative Panzar-Rosse statistic. Using the former approach, the Korean financial industry appears heavily bank-centered and the banking industry is highly concentrated relative to the securities industry. This has created concerns over possible monopolistic power. Yet market concentration itself is not a sufficient condition for monopoly or monopolistic competition. In fact, in the latter approach, which focuses on players’ behaviors as profit maximizers rather than on market concentration itself, the banking industry is found to be more competitive than the securities industry, consistent with Bikker and Haaf (2002). Noteworthy in this regard is that, following the Asian financial crisis, the banking industry was reformed and consolidated to meet international accounting and supervisory codes based on well-defined efficiency and market competition principles while securities industry was not. Therefore, the two seemingly contradictory results are not incompatible and, importantly, they hint at the directions that the securities industry may pursue.
Abstract
The objective of this paper is to provide a comparative analysis of the competition structures of the two main types of financial intermediation in Korea, the banking and securities industries. The competition structure of each collectively determines that of the industry as a whole. Two approaches are adopted: quantitative market concentration measures and a qualitative Panzar-Rosse statistic. Using the former approach, the Korean financial industry appears heavily bank-centered and the banking industry is highly concentrated relative to the securities industry. This has created concerns over possible monopolistic power. Yet market concentration itself is not a sufficient condition for monopoly or monopolistic competition. In fact, in the latter approach, which focuses on players’ behaviors as profit maximizers rather than on market concentration itself, the banking industry is found to be more competitive than the securities industry, consistent with Bikker and Haaf (2002). Noteworthy in this regard is that, following the Asian financial crisis, the banking industry was reformed and consolidated to meet international accounting and supervisory codes based on well-defined efficiency and market competition principles while securities industry was not. Therefore, the two seemingly contradictory results are not incompatible and, importantly, they hint at the directions that the securities industry may pursue.
참고문헌 (16)
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