Abstract

The Iranian banking sector has undergone huge and substantial reform in the last decade;¬ privatization¬, establishment of private banks and development of modern technologies (IT). Based on a sample of 19 banks, This paper investigates the competitive condition of the Iranian banking industry over the period 2005-2010 using the H-statistic proposed by Panzar and Rosse.. The properties of this non-structural methodology (e.g. using firm level data, robustness in small samples, no need to specify a relevant market, etc.) make it an excellent framework for assessing the degree of competition in the banking industry. To estimate H-statistic Panel date approach has been used. The estimated H statistics for the whole sample period is 0/7101 and the Wald test for the market structure of monopoly or perfect competition is rejected and implying that the banks earned their revenues in the condition of monopolistic competition.

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