The competition and market structure in the Saudi Arabia banking

Abstract

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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