Advertisement

Determinants of the Performance of Banks in Hong Kong

  • Jim Wong
  • Tom Pak-Wing Fong
  • Eric Tak-Chuen Wong
  • Ka-Fai Choi
Part of the Palgrave Macmillan Studies in Banking and Financial Institutions book series (SBFI)

Abstract

What factors determine the performance of banks in general, and how banks’ profits and pricing behaviours are affected by market structure in particular, have been extensively studied. Amongst the various approaches, a number of studies have focused on the structure–performance relationship of banks, with the structure– conduct–performance (SCP) hypothesis and the efficient-structure (EFS) hypothesis widely tested.2 In general, banks’ profitability and pricing power are hypothesized to be determined by the market structure of the banking industry, such as the number of participating banks in the market and the market shares of banks, and bank-specific factors, such as cost efficiency, scale efficiency, and the risk attitude of banks. Macroeconomic factors, such as real GDP growth and unemployment, may also be important determinants.

Keywords

Banking Sector Large Bank Scale Efficiency Market Concentration Small Bank 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

Preview

Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.

References

  1. R. F. Allen and A. S. Hagin, ‘Scale-Related Efficiencies as a (Minor) Source of the Profits–Market Share Relationship’, Review of Economics and Statistics, 71 (1989) 523–6.CrossRefGoogle Scholar
  2. A. N. Berger, ‘The Profit–Structure Relationship in Banking –Tests of Market-power and Efficient-structure Hypothesis’, Journal of Money, Credit and Banking, 27 (1995) 404–31.CrossRefGoogle Scholar
  3. A. N. Berger and T. H. Hannan, ‘The Price–Concentration Relationship in Banking’, Review of Economics and Statistics, 71 (1989) 291–9.CrossRefGoogle Scholar
  4. A. N. Berger and T. H. Hannan, ‘Using Efficiency Measures to Distinguish among Alternative Explanations of the Structure–Performance Relationship in Banking’, Federal Reserve Board Working Paper, (1993).Google Scholar
  5. H. Demsetz, ‘Industry Structure, Market Rivalry, and Public Policy’, Journal of Law and Economics, 16 (1973 ) 1–19.CrossRefGoogle Scholar
  6. H. Demsetz, ‘Two Systems of Beliefs about Monopoly’, in H. Goldschmid (ed.), Industrial Concentration: The New Learning, ( Boston: Little Brown, 1974 ).Google Scholar
  7. R. A. Gilbert, ‘Studies of Bank Market Structure and Competition: A Review and Evaluation’, Journal of Money, Credit, and Banking, 16 (1984) 617–44.CrossRefGoogle Scholar
  8. L. G. Goldberg and A. Rai, ‘The Structure–Performance Relationship for European Banking’, Journal of Banking and Finance, 20 (1996) 745–71.CrossRefGoogle Scholar
  9. T. H. Hannan, ‘Bank Commercial Loan Markets and the Role of Market Structure: Evidence form Surveys of Commercial Lending’, Journal of Banking and Finance, 15 (1991) 133–49.CrossRefGoogle Scholar
  10. J. D. Murray and R. W. White, ‘Economies of Scale and Economies of Scope in Multiproduct Financial Institutions: A Study of British Columbia Credit Unions’, Journal of Finance, 38 (3) (1983) 887–902.CrossRefGoogle Scholar
  11. S. Peltzman, ‘The Gains and Losses from Industrial Concentration’, Journal of Law and Economics, 20 (1977) 229–63.CrossRefGoogle Scholar
  12. M. Smirlock, ‘Evidence on the (Non) Relationship between Concentration and Profitability in Banking’, Journal of Money, Credit and Banking, 17 (1985) 69–83.CrossRefGoogle Scholar
  13. M. Smirlock, T. Gilligan and W. Marshall, ‘Tobin’s q and the Structure-Performance Relationship’, American Economic Review, 74 (1984) 1050–60.Google Scholar
  14. M. Smirlock, T. Gilligan and W. Marshall, ‘Tobin’s q and the Structure-Performance Relationship: Reply’, American Economic Review, 74 (1986) 1211–13.Google Scholar
  15. S. G. Timme and W. K. Yang, ‘On the Use of a Direct Measure of Efficiency in Testing Structure–Performance Relationships’, Working paper, (1991), Georgia State University.Google Scholar
  16. J. Wong, T. Fong, E. Wong and K. F. Choi, ‘The Cost Efficiency of Commercial Banks in Hong Kong’, HKMA Research Memorandum, 12 /2006 (2006a).Google Scholar
  17. J. Wong, E. Wong, T. Fong and K. F. Choi, ‘Competition in Hong Kong’s Banking Sector: A Panzar-Rosse Assessment’, HKMA Research Memorandum, 16 /2006 (2006b).Google Scholar
  18. J. Wong, E. Wong, T. Fong and K. F. Choi, ‘Testing for Collusion in the Hong Kong Banking Sector’, HKMA Research Memorandum, 03/2007.Google Scholar

Copyright information

© Jim Wong, Tom Pak-Wing Fong, Eric Tak-Chuen Wong and Ka-Fai Choi 2008

Authors and Affiliations

  • Jim Wong
  • Tom Pak-Wing Fong
  • Eric Tak-Chuen Wong
  • Ka-Fai Choi

There are no affiliations available

Personalised recommendations