The Effects of Concentration and Market Share Upon the Performance of Jordan's Commercial Banks

Ezeddin Mostafa Alkour

Abstract


The aim of this study was to examine the effect of market concentration from assets according to Structure – Conduct – Performance (SCP) model and market share of deposits in accordance with the efficiency hypothesis upon the performance of Jordan's commercial banks measured by return on assets (ROA). The sample of our study consists of 14 commercial banks from 1993 until 2006. We used pooled data regression to test the hypotheses of the study. We found that the hypothesis which depends on (SCP) is rejected, therefore the alliance assumption is excluded between banks with high concentration, as well as the results which doesn't provide support to the hypothesis of traditional efficiency, which states that the most efficient organizations achieve higher rates of return and gain higher profitability which leads us to believe that the concentration of commercial banks in the Jordanian market refers basically to political and social factors and to the advantage of an early entrance into market which made only few banks obtain a high market share. However as a result of rules and regulations which encouraged the level of competition, there was no alliance between banks that are of high concentration level, those banks to dominate the market force upon the inputs and outputs prices as part of the commercial banks in Jordan.

Keywords


Structure-Conduct Performance, Market Share, Return on Assets

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