<abstract xmlns="http://www.w3.org/1999/xhtml">

<p>This study investigates the relationship between profitability and market power in the banking sector using data from the financial reports of the banks that operated in Serbia and Montenegro, covering the period from the first quarter of 2010 to the last quarter of 2019. In order to investigate this relationship, determinants of bank profitability are split between internal and external. As the external determinants, selected ratios of concentration were calculated and used in order to measure market power. The total of sixteen panel regression models were applied, eight for each country. The results indicate that variations of return on assets and return on equity in Serbia can be explained by the variations of the ratios of concentration. On the other hand, results of the panel regression model applied for the banking sector of Montenegro does not give enough argument to support such explanation, and bank profitability can be explained by bank efficiency to some extent.</p>
</abstract>

This study investigates the relationship between profitability and market power in the banking sector using data from the financial reports of the banks that operated in Serbia and Montenegro, covering the period from the first quarter of 2010 to the last quarter of 2019. In order to investigate this relationship, determinants of bank profitability are split between internal and external. As the external determinants, selected ratios of concentration were calculated and used in order to measure market power. The total of sixteen panel regression models were applied, eight for each country. The results indicate that variations of return on assets and return on equity in Serbia can be explained by the variations of the ratios of concentration. On the other hand, results of the panel regression model applied for the banking sector of Montenegro does not give enough argument to support such explanation, and bank profitability can be explained by bank efficiency to some extent.

Market Power and Bank Profitability: Evidence from Montenegro and Serbia

Journal of Central Banking Theory and Practice

This work is licensed under the Creative Commons Attribution 4.0 International License.

{"article-title":"Market Power and Bank Profitability: Evidence from Montenegro and Serbia"}

This study investigates the relationship between profitability and market power in the banking sector using data from the financial reports of the banks that...

Market Power and Bank Profitability: Evidence from Montenegro and Serbia

Published Online: Jan 18, 2022

Page range: 5 - 22

Received: Aug 30, 2020

Accepted: Oct 12, 2021

DOI: https://doi.org/10.2478/jcbtp-2022-0001

Keywords
banking sector, bank profitability, market power, competition

© 2022 Zoran Grubišić et al., published by Sciendo

This work is licensed under the Creative Commons Attribution 4.0 International License.

Market Power and Bank Profitability: Evidence from Montenegro and Serbia

Published Online: Jan 18, 2022

Page range: 5 - 22

Received: Aug 30, 2020

Accepted: Oct 12, 2021

DOI: https://doi.org/10.2478/jcbtp-2022-0001

Keywordsbanking sector, bank profitability, market power, competition

© 2022 Zoran Grubišić et al., published by Sciendo

This work is licensed under the Creative Commons Attribution 4.0 International License.

Keywords
banking sector, bank profitability, market power, competition