A Study On The Relationship Between Market Structure And Business Performance Of Commercial Banks

The relationship between market structure and performance is an important research area of industrial economics in which many researchers had investigated among the market in the country. In this paper, the commercial bank market in Shandong Province is investigated. With panel data of the27banks from2008to2012, this paper analyzes the market structure of Shandong Province commercial banks and its changes. Then this paper estimates efficiency and the performance of the selected27commercial banks. At last this paper builds regression model to analyze the relationship between the change of market structure and performance based on which this paper puts forward some feasible suggestions.The results show several points. First, the market concentration of commercial banks in Shandong is relatively low and the level of competition is increasing, the concentration in the profit market of the four biggest commercial banks is higher than in others. Second, there is an upward trend in the profitability of Shandong banking industry apart from several banks. the banks who have big market share have high profitability. Third. in the case of Shandong commercial banking market, by hypothesis test,"Structure-Conduct-Performance" and "Scale-Efficiency-Structure" hypothesis don’t exist. but the "Relative-Market-Power" hypothesis and the "X-efficiency structure hypothesis" is supported by evidence. Suggestion is that the authorities should suitably relax the market entrance system in order to encourage competition. Also commercial banks should optimized the structure of intermediary businesses to guard against operational risks; improve the relevant systems and mechanisms to improve the efficiency of commercial banks.